G.R. No.

L-18107

August 30, 1962

MARIA G. AGUAS, FELIX GUARDINO and FRANCISCO SALINAS, plaintiffs-appellants,

vs.
HERMOGENES LLEMOS, deceased defendant substituted by his representatives,
PERPETUA YERRO-LLEMOS, HERMENEGILDO LLEMOS, FELINO LLEMOS and AMADO
LLEMOS,defendants-appellees.
Jesus M. Aguas for plaintiffs-appellants.
Serafin P. Ramento for defendants-appellees.
REYES, J.B.L., J.:
On 14 March 1960, Francisco Salinas and the spouses Felix Guardino and Maria Aguas jointly filed
an action in the Court of First Instance of Catbalogan, Samar (Civil Case No. 4824), to recover
damages from Hermogenes Llemos, averring that the latter had served them by registered mail
with a copy of a petition for a writ of possession, with notice that the same would be submitted to
the said court of Samar on February 23, 1960 at 8: 00 a.m.; that in view of the copy and notice
served, plaintiffs proceeded to the court from their residence in Manila accompanied by their
lawyers, only to discover that no such petition had been filed; and that defendant Llemos
maliciously failed to appear in court, so that plaintiffs' expenditure and trouble turned out to be in
vain, causing them mental anguish and undue embarrassment.
On 1 April 1960, before he could answer the complaint, the defendant died. Upon leave of court,
plaintiffs amended their complaint to include the heirs of the deceased. On 21 July 1960, the heirs
filed a motion to dismiss, and by order of 12 August 1960, the court below dismissed it, on the
ground that the legal representative, and not the heirs, should have been made the party defendant;
and that anyway the action being for recovery of money, testate or intestate proceedings should be
initiated and the claim filed therein (Rec. on Appeal, pp. 26-27).
Motion for reconsideration having been denied, the case was appealed to us on points of
law.1wph1.t
Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the Rules of
Court, those concerning claims that are barred if not filed in the estate settlement proceedings
(Rule 87, sec. 5) and those defining actions that survive and may be prosecuted against the executor
or administrator (Rule 88, sec. 1), it is apparent that actions for damages caused by tortious
conduct of a defendant (as in the case at bar) survive the death of the latter. Under Rule 87, section
5, the actions that are abated by death are: (1) claims for funeral expenses and those for the last
sickness of the decedent; (2) judgments for money; and (3) "all claims for money against the
decedent, arising from contract express or implied". None of these includes that of the plaintiffsappellants; for it is not enough that the claim against the deceased party be for money, but it must
arise from "contract express or implied", and these words (also used by the Rules in connection
with attachments and derived from the common law) were construed in Leung Ben vs. O'Brien, 38
Phil., 182, 189-194.
to include all purely personal obligations other than those which have their source
in delict or tort.

Upon the other hand, Rule 88, section 1, enumerates actions that survive against a decedent's
executors or administrators, and they are: (1) actions to recover real and personal property from
the estate; (2) actions to enforce a lien thereon; and (3) actions to recover damages for an injury to
person or property. The present suit is one for damages under the last class, it having been held
that "injury to property" is not limited to injuries to specific property, but extends to other wrongs
by which personal estate is injured or diminished (Baker vs. Crandall, 47 Am. Rep. 126; also 171
A.L.R., 1395). To maliciously cause a party to incur unnecessary expenses, as charged in this case, is
certainly injurious to that party's property (Javier vs. Araneta, L-4369, Aug. 31, 1953).
Be that as it may, it now appears from a communication from the Court of First Instance of Samar
that the parties have arrived at an amicable settlement of their differences, and that they have
agreed to dismiss this appeal. The settlement has been approved and embodied in an order of the
Court of First Instance.
The case having thus become moot, it becomes unnecessary to resolve the questions raised therein.
This appeal is, therefore, ordered dismissed, without special pronouncement as to costs.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and
Makalintal, JJ., concur.

G.R. No. L-18805

August 14, 1967

THE BOARD OF LIQUIDATORS1 representing THE GOVERNMENT OF THE REPUBLIC OF THE

PHILIPPINES, plaintiff-appellant,
vs.
HEIRS OF MAXIMO M. KALAW,2 JUAN BOCAR, ESTATE OF THE DECEASED CASIMIRO
GARCIA,3 and LEONOR MOLL, defendants-appellees.
Simeon M. Gopengco and Solicitor General for plaintiff-appellant.
L. H. Hernandez, Emma Quisumbing, Fernando and Quisumbing, Jr.; Ponce Enrile, Siguion Reyna,
Montecillo and Belo for defendants-appellees.
SANCHEZ, J.:
The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit governmental
organization on May 7, 1940 by Commonwealth Act 518 avowedly for the protection, preservation
and development of the coconut industry in the Philippines. On August 1, 1946, NACOCO's charter
was amended [Republic Act 5] to grant that corporation the express power "to buy, sell, barter,
export, and in any other manner deal in, coconut, copra, and dessicated coconut, as well as their byproducts, and to act as agent, broker or commission merchant of the producers, dealers or
merchants" thereof. The charter amendment was enacted to stabilize copra prices, to serve coconut
producers by securing advantageous prices for them, to cut down to a minimum, if not altogether
eliminate, the margin of middlemen, mostly aliens.4

General manager and board chairman was Maximo M. Kalaw; defendants Juan Bocar and Casimiro
Garcia were members of the Board; defendant Leonor Moll became director only on December 22,
1947.
NACOCO, after the passage of Republic Act 5, embarked on copra trading activities. Amongst the
scores of contracts executed by general manager Kalaw are the disputed contracts, for the delivery
of copra, viz:
(a) July 30, 1947: Alexander Adamson & Co., for 2,000 long tons, $167.00: per ton, f. o. b.,
delivery: August and September, 1947. This contract was later assigned to Louis Dreyfus &
Co. (Overseas) Ltd.
(b) August 14, 1947: Alexander Adamson & Co., for 2,000 long tons $145.00 per long ton,
f.o.b., Philippine ports, to be shipped: September-October, 1947. This contract was also
assigned to Louis Dreyfus & Co. (Overseas) Ltd.
(c) August 22, 1947: Pacific Vegetable Co., for 3,000 tons, $137.50 per ton, delivery:
September, 1947.
(d) September 5, 1947: Spencer Kellog & Sons, for 1,000 long tons, $160.00 per ton, c.i.f., Los
Angeles, California, delivery: November, 1947.
(e) September 9, 1947: Franklin Baker Division of General Foods Corporation, for 1,500
long tons, $164,00 per ton, c.i.f., New York, to be shipped in November, 1947.
(f) September 12, 1947: Louis Dreyfus & Co. (Overseas) Ltd., for 3,000 long tons, $154.00
per ton, f.o.b., 3 Philippine ports, delivery: November, 1947.
(g) September 13, 1947: Juan Cojuangco, for 2,000 tons, $175.00 per ton, delivery:
November and December, 1947. This contract was assigned to Pacific Vegetable Co.
(h) October 27, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific
ports, delivery: December, 1947 and January, 1948. This contract was assigned to Pacific
Vegetable Co.
(i) October 28, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific
ports, delivery: January, 1948. This contract was assigned to Pacific Vegetable Co.
An unhappy chain of events conspired to deter NACOCO from fulfilling these contracts. Nature
supervened. Four devastating typhoons visited the Philippines: the first in October, the second and
third in November, and the fourth in December, 1947. Coconut trees throughout the country
suffered extensive damage. Copra production decreased. Prices spiralled. Warehouses were
destroyed. Cash requirements doubled. Deprivation of export facilities increased the time necessary
to accumulate shiploads of copra. Quick turnovers became impossible, financing a problem.
When it became clear that the contracts would be unprofitable, Kalaw submitted them to the board
for approval. It was not until December 22, 1947 when the membership was completed. Defendant
Moll took her oath on that date. A meeting was then held. Kalaw made a full disclosure of the
situation, apprised the board of the impending heavy losses. No action was taken on the contracts.

Neither did the board vote thereon at the meeting of January 7, 1948 following. Then, on January
11, 1948, President Roxas made a statement that the NACOCO head did his best to avert the losses,
emphasized that government concerns faced the same risks that confronted private companies, that
NACOCO was recouping its losses, and that Kalaw was to remain in his post. Not long thereafter,
that is, on January 30, 1948, the board met again with Kalaw, Bocar, Garcia and Moll in attendance.
They unanimously approved the contracts hereinbefore enumerated.
As was to be expected, NACOCO but partially performed the contracts, as follows:
Buyers
Pacific Vegetable Oil

Tons Delivered Undelivered

2,386.45

4,613.55

Spencer Kellog

None

1,000

Franklin Baker

1,000

500

800

2,200

Louis Dreyfus (Adamson contract of July 30, 1947)

1,150

850

Louis Dreyfus (Adamson Contract of August 14, 1947)

1,755

245

7,091.45

9,408.55

Louis Dreyfus

TOTALS

The buyers threatened damage suits. Some of the claims were settled, viz: Pacific Vegetable Oil Co.,
in copra delivered by NACOCO, P539,000.00; Franklin Baker Corporation, P78,210.00; Spencer
Kellog & Sons, P159,040.00.
But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue before the Court of First Instance
of Manila, upon claims as follows: For the undelivered copra under the July 30 contract (Civil Case
4459); P287,028.00; for the balance on the August 14 contract (Civil Case 4398), P75,098.63; for
that per the September 12 contract reduced to judgment (Civil Case 4322, appealed to this Court in
L-2829), P447,908.40. These cases culminated in an out-of-court amicable settlement when the
Kalaw management was already out. The corporation thereunder paid Dreyfus P567,024.52
representing 70% of the total claims. With particular reference to the Dreyfus claims, NACOCO put
up the defenses that: (1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did
not have license to do business here; and (2) failure to deliver was due to force majeure, the
typhoons. To project the utter unreasonableness of this compromise, we reproduce in haec
verba this finding below:
x x x However, in similar cases brought by the same claimant [Louis Dreyfus & Co.
(Overseas) Ltd.] against Santiago Syjuco for non-delivery of copra also involving a claim of
P345,654.68 wherein defendant set upsame defenses as above, plaintiff accepted
a promise of P5,000.00 only (Exhs. 31 & 32 Heirs.) Following the same proportion, the claim
of Dreyfus against NACOCO should have been compromised for only P10,000.00, if at all.
Now, why should defendants be held liable for the large sum paid as compromise by the
Board of Liquidators? This is just a sample to show how unjust it would be to hold defendants
liable for the readiness with which the Board of Liquidators disposed of the NACOCO funds,

although there was much possibility of successfully resisting the claims, or at least settlement
for nominal sums like what happened in the Syjuco case.5
All the settlements sum up to P1,343,274.52.
In this suit started in February, 1949, NACOCO seeks to recover the above sum of P1,343,274.52
from general manager and board chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro
Garcia and Leonor Moll. It charges Kalaw with negligence under Article 1902 of the old Civil Code
(now Article 2176, new Civil Code); and defendant board members, including Kalaw, with bad faith
and/or breach of trust for having approved the contracts. The fifth amended complaint, on which
this case was tried, was filed on July 2, 1959. Defendants resisted the action upon defenses
hereinafter in this opinion to be discussed.
The lower court came out with a judgment dismissing the complaint without costs as well as
defendants' counterclaims, except that plaintiff was ordered to pay the heirs of Maximo Kalaw the
sum of P2,601.94 for unpaid salaries and cash deposit due the deceased Kalaw from NACOCO.
Plaintiff appealed direct to this Court.
Plaintiff's brief did not, question the judgment on Kalaw's counterclaim for the sum of P2,601.94.
Right at the outset, two preliminary questions raised before, but adversely decided by, the court
below, arrest our attention. On appeal, defendants renew their bid. And this, upon established
jurisprudence that an appellate court may base its decision of affirmance of the judgment below on
a point or points ignored by the trial court or in which said court was in error.6
1. First of the threshold questions is that advanced by defendants that plaintiff Board of Liquidators
has lost its legal personality to continue with this suit.
Accepted in this jurisdiction are three methods by which a corporation may wind up its affairs: (1)
under Section 3, Rule 104, of the Rules of Court [which superseded Section 66 of the Corporation
Law]7 whereby, upon voluntary dissolution of a corporation, the court may direct "such disposition
of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts
of the corporation;" (2) under Section 77 of the Corporation Law, whereby a corporation whose
corporate existence is terminated, "shall nevertheless be continued as a body corporate for three
years after the time when it would have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose
of and convey its property and to divide its capital stock, but not for the purpose of continuing the
business for which it was established;" and (3) under Section 78 of the Corporation Law, by virtue
of which the corporation, within the three year period just mentioned, "is authorized and
empowered to convey all of its property to trustees for the benefit of members, stockholders,
creditors, and others interested."8
It is defendants' pose that their case comes within the coverage of the second method. They reason
out that suit was commenced in February, 1949; that by Executive Order 372, dated November 24,
1950, NACOCO, together with other government-owned corporations, was abolished, and the Board
of Liquidators was entrusted with the function of settling and closing its affairs; and that, since the
three year period has elapsed, the Board of Liquidators may not now continue with, and prosecute,

the present case to its conclusion, because Executive Order 372 provides in Section 1 thereof that

Sec.1. The National Abaca and Other Fibers Corporation, the National Coconut Corporation,
the National Tobacco Corporation, the National Food Producer Corporation and the former
enemy-owned or controlled corporations or associations, . . . are hereby abolished. The said
corporations shall be liquidated in accordance with law, the provisions of this Order, and/or
in such manner as the President of the Philippines may direct; Provided, however, That each
of the said corporations shall nevertheless be continued as a body corporate for a period of
three (3) years from the effective date of this Executive Order for the purpose of
prosecuting and defending suits by or against it and of enabling the Board of Liquidators
gradually to settle and close its affairs, to dispose of and, convey its property in the manner
hereinafter provided.
Citing Mr. Justice Fisher, defendants proceed to argue that even where it may be found impossible
within the 3 year period to reduce disputed claims to judgment, nonetheless, "suits by or against a
corporation abate when it ceases to be an entity capable of suing or being sued" (Fisher, The
Philippine Law of Stock Corporations, pp. 390-391). Corpus Juris Secundum likewise is authority for
the statement that "[t]he dissolution of a corporation ends its existence so that there must be
statutory authority for prolongation of its life even for purposes of pending litigation"9 and that suit
"cannot be continued or revived; nor can a valid judgment be rendered therein, and a judgment, if
rendered, is not only erroneous, but void and subject to collateral attack." 10 So it is, that abatement
of pending actions follows as a matter of course upon the expiration of the legal period for
liquidation, 11 unless the statute merely requires a commencement of suit within the added
time. 12 For, the court cannot extend the time alloted by statute. 13
We, however, express the view that the executive order abolishing NACOCO and creating the Board
of Liquidators should be examined in context. The proviso in Section 1 of Executive Order 372,
whereby the corporate existence of NACOCO was continued for a period of three years from the
effectivity of the order for "the purpose of prosecuting and defending suits by or against it and of
enabling the Board of Liquidators gradually to settle and close its affairs, to dispose of and convey
its property in the manner hereinafter provided", is to be read not as an isolated provision but in
conjunction with the whole. So reading, it will be readily observed that no time limit has been
tacked to the existence of the Board of Liquidators and its function of closing the affairs of the
various government owned corporations, including NACOCO.
By Section 2 of the executive order, while the boards of directors of the various corporations were
abolished, their powers and functions and duties under existing laws were to be assumed and
exercised by the Board of Liquidators. The President thought it best to do away with the boards of
directors of the defunct corporations; at the same time, however, the President had chosen to see to
it that the Board of Liquidators step into the vacuum. And nowhere in the executive order was there
any mention of the lifespan of the Board of Liquidators. A glance at the other provisions of the
executive order buttresses our conclusion. Thus, liquidation by the Board of Liquidators may, under
section 1, proceed in accordance with law, the provisions of the executive order, "and/or in such
manner as the President of the Philippines may direct." By Section 4, when any property, fund, or
project is transferred to any governmental instrumentality "for administration or continuance of
any project," the necessary funds therefor shall be taken from the corresponding special fund
created in Section 5. Section 5, in turn, talks of special funds established from the "net proceeds of
the liquidation" of the various corporations abolished. And by Section, 7, fifty per centum of the fees

collected from the copra standardization and inspection service shall accrue "to the special fund
created in section 5 hereof for the rehabilitation and development of the coconut industry." Implicit
in all these, is that the term of life of the Board of Liquidators is without time limit. Contemporary
history gives us the fact that the Board of Liquidators still exists as an office with officials and
numerous employees continuing the job of liquidation and prosecution of several court actions.
Not that our views on the power of the Board of Liquidators to proceed to the final determination of
the present case is without jurisprudential support. The first judicial test before this Court
is National Abaca and Other Fibers Corporation vs. Pore, L-16779, August 16, 1961. In that case, the
corporation, already dissolved, commenced suit within the three-year extended period for
liquidation. That suit was for recovery of money advanced to defendant for the purchase of hemp in
behalf of the corporation. She failed to account for that money. Defendant moved to dismiss,
questioned the corporation's capacity to sue. The lower court ordered plaintiff to include as coparty plaintiff, The Board of Liquidators, to which the corporation's liquidation was entrusted
by Executive Order 372. Plaintiff failed to effect inclusion. The lower court dismissed the suit.
Plaintiff moved to reconsider. Ground: excusable negligence, in that its counsel prepared the
amended complaint, as directed, and instructed the board's incoming and outgoing correspondence
clerk, Mrs. Receda Vda. de Ocampo, to mail the original thereof to the court and a copy of the same
to defendant's counsel. She mailed the copy to the latter but failed to send the original to the court.
This motion was rejected below. Plaintiff came to this Court on appeal. We there said that "the rule
appears to be well settled that, in the absence of statutory provision to the contrary, pending
actions by or against a corporation are abated upon expiration of the period allowed by law for the
liquidation of its affairs." We there said that "[o]ur Corporation Law contains no provision
authorizing a corporation, after three (3) years from the expiration of its lifetime, to continue in its
corporate name actions instituted by it within said period of three (3) years." 14 However, these
precepts notwithstanding, we, in effect, held in that case that the Board of Liquidators escapes from
the operation thereof for the reason that "[o]bviously, the complete loss of plaintiff's corporate
existence after the expiration of the period of three (3) years for the settlement of its affairs is what
impelled the President to create a Board of Liquidators, to continue the management of such matters
as may then be pending." 15 We accordingly directed the record of said case to be returned to the
lower court, with instructions to admit plaintiff's amended complaint to include, as party plaintiff,
the Board of Liquidators.
Defendants' position is vulnerable to attack from another direction.
By Executive Order 372, the government, the sole stockholder, abolished NACOCO, and placed its
assets in the hands of the Board of Liquidators. The Board of Liquidators thus became the trustee on
behalf of the government. It was an express trust. The legal interest became vested in the trustee
the Board of Liquidators. The beneficial interest remained with the sole stockholder the
government. At no time had the government withdrawn the property, or the authority to continue
the present suit, from the Board of Liquidators. If for this reason alone, we cannot stay the hand of
the Board of Liquidators from prosecuting this case to its final conclusion. 16 The provisions of
Section 78 of the Corporation Law the third method of winding up corporate affairs find
application.
We, accordingly, rule that the Board of Liquidators has personality to proceed as: party-plaintiff in
this case.
2. Defendants' second poser is that the action is unenforceable against the heirs of Kalaw.

Appellee heirs of Kalaw raised in their motion to dismiss, 17 which was overruled, and in their
nineteenth special defense, that plaintiff's action is personal to the deceased Maximo M. Kalaw, and
may not be deemed to have survived after his death.18 They say that the controlling statute is
Section 5, Rule 87, of the 1940 Rules of Court.19 which provides that "[a]ll claims for money against
the decedent, arising from contract, express or implied", must be filed in the estate proceedings of
the deceased. We disagree.
The suit here revolves around the alleged negligent acts of Kalaw for having entered into the
questioned contracts without prior approval of the board of directors, to the damage and prejudice
of plaintiff; and is against Kalaw and the other directors for having subsequently approved the said
contracts in bad faith and/or breach of trust." Clearly then, the present case is not a mere action for
the recovery of money nor a claim for money arising from contract. The suit involves alleged
tortious acts. And the action is embraced in suits filed "to recover damages for an injury to person
or property, real or personal", which survive. 20
The leading expositor of the law on this point is Aguas vs. Llemos, L-18107, August 30, 1962. There,
plaintiffs sought to recover damages from defendant Llemos. The complaint averred that Llemos
had served plaintiff by registered mail with a copy of a petition for a writ of possession in Civil Case
4824 of the Court of First Instance at Catbalogan, Samar, with notice that the same would be
submitted to the Samar court on February 23, 1960 at 8:00 a.m.; that in view of the copy and notice
served, plaintiffs proceeded to the said court of Samar from their residence in Manila accompanied
by their lawyers, only to discover that no such petition had been filed; and that defendant Llemos
maliciously failed to appear in court, so that plaintiffs' expenditure and trouble turned out to be in
vain, causing them mental anguish and undue embarrassment. Defendant died before he could
answer the complaint. Upon leave of court, plaintiffs amended their complaint to include the heirs
of the deceased. The heirs moved to dismiss. The court dismissed the complaint on the ground that
the legal representative, and not the heirs, should have been made the party defendant; and that,
anyway, the action being for recovery of money, testate or intestate proceedings should be initiated
and the claim filed therein. This Court, thru Mr. Justice Jose B. L. Reyes, there declared:
Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the
Rules of Court, those concerning claims that are barred if not filed in the estate settlement
proceedings (Rule 87, sec. 5) and those defining actions that survive and may be prosecuted
against the executor or administrator (Rule 88, sec. 1), it is apparent that actions for
damages caused by tortious conduct of a defendant (as in the case at bar) survive the death
of the latter. Under Rule 87, section 5, the actions that are abated by death are: (1) claims
for funeral expenses and those for the last sickness of the decedent; (2) judgments for
money; and (3) "all claims for money against the decedent, arising from contract express or
implied." None of these includes that of the plaintiffs-appellants; for it is not enough that the
claim against the deceased party be for money, but it must arise from "contract express or
implied", and these words (also used by the Rules in connection with attachments and
derived from the common law) were construed in Leung Ben vs. O'Brien, 38 Phil. 182, 189194,
"to include all purely personal obligations other than those which have their source
in delict or tort."
Upon the other hand, Rule 88, section 1, enumerates actions that survive against a
decedent's executors or administrators, and they are: (1) actions to recover real and

personal property from the estate; (2) actions to enforce a lien thereon; and (3) actions to
recover damages for an injury to person or property. The present suit is one for damages
under the last class, it having been held that "injury to property" is not limited to injuries to
specific property, but extends to other wrongs by which personal estate is injured or
diminished (Baker vs. Crandall, 47 Am. Rep. 126; also 171 A.L.R., 1395). To maliciously
cause a party to incur unnecessary expenses, as charged in this case, is certainly injury to
that party's property (Javier vs. Araneta, L-4369, Aug. 31, 1953).
The ruling in the preceding case was hammered out of facts comparable to those of the present. No
cogent reason exists why we should break away from the views just expressed. And, the conclusion
remains: Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro Garcia
survives.
The preliminaries out of the way, we now go to the core of the controversy.
3. Plaintiff levelled a major attack on the lower court's holding that Kalaw justifiedly entered into
the controverted contracts without the prior approval of the corporation's directorate. Plaintiff
leans heavily on NACOCO's corporate by-laws. Article IV (b), Chapter III thereof, recites, as amongst
the duties of the general manager, the obligation: "(b) To perform or execute on behalf of the
Corporation upon prior approval of the Board, all contracts necessary and essential to the proper
accomplishment for which the Corporation was organized."
Not of de minimis importance in a proper approach to the problem at hand, is the nature of a
general manager's position in the corporate structure. A rule that has gained acceptance through
the years is that a corporate officer "intrusted with the general management and control of its
business, has implied authority to make any contract or do any other act which is necessary or
appropriate to the conduct of the ordinary business of the corporation. 21As such officer, "he may,
without any special authority from the Board of Directors perform all acts of an ordinary nature,
which by usage or necessity are incident to his office, and may bind the corporation by contracts in
matters arising in the usual course of business. 22
The problem, therefore, is whether the case at bar is to be taken out of the general concept of the
powers of a general manager, given the cited provision of the NACOCO by-laws requiring prior
directorate approval of NACOCO contracts.
The peculiar nature of copra trading, at this point, deserves express articulation. Ordinary in this
enterprise are copra sales for future delivery. The movement of the market requires that sales
agreements be entered into, even though the goods are not yet in the hands of the seller. Known in
business parlance as forward sales, it is concededly the practice of the trade. A certain amount of
speculation is inherent in the undertaking. NACOCO was much more conservative than the
exporters with big capital. This short-selling was inevitable at the time in the light of other factors
such as availability of vessels, the quantity required before being accepted for loading, the labor
needed to prepare and sack the copra for market. To NACOCO, forward sales were a necessity.
Copra could not stay long in its hands; it would lose weight, its value decrease. Above all, NACOCO's
limited funds necessitated a quick turnover. Copra contracts then had to be executed on short
notice at times within twenty-four hours. To be appreciated then is the difficulty of calling a
formal meeting of the board.
Such were the environmental circumstances when Kalaw went into copra trading.

Long before the disputed contracts came into being, Kalaw contracted by himself alone as
general manager for forward sales of copra. For the fiscal year ending June 30, 1947, Kalaw
signed some 60 such contracts for the sale of copra to divers parties. During that period, from those
copra sales, NACOCO reaped a gross profit of P3,631,181.48. So pleased was NACOCO's board of
directors that, on December 5, 1946, in Kalaw's absence, it voted to grant him a special bonus "in
recognition of the signal achievement rendered by him in putting the Corporation's business on a
self-sufficient basis within a few months after assuming office, despite numerous handicaps and
difficulties."
These previous contract it should be stressed, were signed by Kalaw without prior authority from
the board. Said contracts were known all along to the board members. Nothing was said by them.
The aforesaid contracts stand to prove one thing: Obviously, NACOCO board met the difficulties
attendant to forward sales by leaving the adoption of means to end, to the sound discretion of
NACOCO's general manager Maximo M. Kalaw.
Liberally spread on the record are instances of contracts executed by NACOCO's general manager
and submitted to the board after their consummation, not before. These agreements were not
Kalaw's alone. One at least was executed by a predecessor way back in 1940, soon after NACOCO
was chartered. It was a contract of lease executed on November 16, 1940 by the then general
manager and board chairman, Maximo Rodriguez, and A. Soriano y Cia., for the lease of a space in
Soriano Building On November 14, 1946, NACOCO, thru its general manager Kalaw, sold 3,000 tons
of copra to the Food Ministry, London, thru Sebastian Palanca. On December 22, 1947, when the
controversy over the present contract cropped up, the board voted to approve a lease contract
previously executed between Kalaw and Fidel Isberto and Ulpiana Isberto covering a warehouse of
the latter. On the same date, the board gave its nod to a contract for renewal of the services of Dr.
Manuel L. Roxas. In fact, also on that date, the board requested Kalaw to report for action all copra
contracts signed by him "at the meeting immediately following the signing of the contracts." This
practice was observed in a later instance when, on January 7, 1948, the board approved two
previous contracts for the sale of 1,000 tons of copra each to a certain "SCAP" and a certain
"GNAPO".
And more. On December 19, 1946, the board resolved to ratify the brokerage commission of 2% of
Smith, Bell and Co., Ltd., in the sale of 4,300 long tons of copra to the French Government. Such
ratification was necessary because, as stated by Kalaw in that same meeting, "under an existing
resolution he is authorized to give a brokerage fee of only 1% on sales of copra made through
brokers." On January 15, 1947, the brokerage fee agreements of 1-1/2% on three export contracts,
and 2% on three others, for the sale of copra were approved by the board with a proviso
authorizing the general manager to pay a commission up to the amount of 1-1/2% "without further
action by the Board." On February 5, 1947, the brokerage fee of 2% of J. Cojuangco & Co. on the sale
of 2,000 tons of copra was favorably acted upon by the board. On March 19, 1947, a 2% brokerage
commission was similarly approved by the board for Pacific Trading Corporation on the sale of
2,000 tons of copra.
It is to be noted in the foregoing cases that only the brokerage fee agreements were passed upon by
the board,not the sales contracts themselves. And even those fee agreements were
submitted only when the commission exceeded the ceiling fixed by the board.
Knowledge by the board is also discernible from other recorded instances.1wph1.t

When the board met on May 10, 1947, the directors discussed the copra situation: There was a slow
downward trend but belief was entertained that the nadir might have already been reached and an
improvement in prices was expected. In view thereof, Kalaw informed the board that "he intends to
wait until he has signed contracts to sell before starting to buy copra."23
In the board meeting of July 29, 1947, Kalaw reported on the copra price conditions then current:
The copra market appeared to have become fairly steady; it was not expected that copra prices
would again rise very high as in the unprecedented boom during January-April, 1947; the prices
seemed to oscillate between $140 to $150 per ton; a radical rise or decrease was not indicated by
the trends. Kalaw continued to say that "the Corporation has been closing contracts for the sale of
copra generally with a margin of P5.00 to P7.00 per hundred kilos." 24
We now lift the following excerpts from the minutes of that same board meeting of July 29, 1947:
521. In connection with the buying and selling of copra the Board inquired whether it is the
practice of the management to close contracts of sale first before buying. The General
Manager replied that this practice is generally followed but that it is not always possible to
do so for two reasons:
(1) The role of the Nacoco to stabilize the prices of copra requires that it should not cease
buying even when it does not have actual contracts of sale since the suspension of buying by
the Nacoco will result in middlemen taking advantage of the temporary inactivity of the
Corporation to lower the prices to the detriment of the producers.
(2) The movement of the market is such that it may not be practical always to wait for the
consummation of contracts of sale before beginning to buy copra.
The General Manager explained that in this connection a certain amount of speculation is
unavoidable. However, he said that the Nacoco is much more conservative than the other
big exporters in this respect.25
Settled jurisprudence has it that where similar acts have been approved by the directors as a matter
of general practice, custom, and policy, the general manager may bind the company without formal
authorization of the board of directors. 26 In varying language, existence of such authority is
established, by proof of the course of business, the usage and practices of the company and by
the knowledge which the board of directors has, or must be presumed to have, of acts and doings of
its subordinates in and about the affairs of the corporation. 27So also,
x x x authority to act for and bind a corporation may be presumed from acts of recognition
in other instances where the power was in fact exercised. 28
x x x Thus, when, in the usual course of business of a corporation, an officer has been
allowed in his official capacity to manage its affairs, his authority to represent the
corporation may be implied from the manner in which he has been permitted by the
directors to manage its business.29
In the case at bar, the practice of the corporation has been to allow its general manager to negotiate
and execute contracts in its copra trading activities for and in NACOCO's behalf without prior board
approval. If the by-laws were to be literally followed, the board should give its stamp of prior

approval on all corporate contracts. But that board itself, by its acts and through acquiescence,
practically laid aside the by-law requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid corporate acts.
4. But if more were required, we need but turn to the board's ratification of the contracts in dispute
on January 30, 1948, though it is our (and the lower court's) belief that ratification here is nothing
more than a mere formality.
Authorities, great in number, are one in the idea that "ratification by a corporation of an
unauthorized act or contract by its officers or others relates back to the time of the act or contract
ratified, and is equivalent to original authority;" and that " [t]he corporation and the other party to
the transaction are in precisely the same position as if the act or contract had been authorized at
the time." 30 The language of one case is expressive: "The adoption or ratification of a contract by a
corporation is nothing more or less than the making of an original contract. The theory of corporate
ratification is predicated on the right of a corporation to contract, and any ratification or adoption
is equivalent to a grant of prior authority." 31
Indeed, our law pronounces that "[r]atification cleanses the contract from all its defects from the
moment it was constituted." 32 By corporate confirmation, the contracts executed by Kalaw are thus
purged of whatever vice or defect they may have. 33
In sum, a case is here presented whereunder, even in the face of an express by-law requirement of
prior approval, the law on corporations is not to be held so rigid and inflexible as to fail to recognize
equitable considerations. And, the conclusion inevitably is that the embattled contracts remain
valid.
5. It would be difficult, even with hostile eyes, to read the record in terms of "bad faith and/or
breach of trust" in the board's ratification of the contracts without prior approval of the board. For,
in reality, all that we have on the government's side of the scale is that the board knew that the
contracts so confirmed would cause heavy losses.
As we have earlier expressed, Kalaw had authority to execute the contracts without need of prior
approval. Everybody, including Kalaw himself, thought so, and for a long time. Doubts were first
thrown on the way only when the contracts turned out to be unprofitable for NACOCO.
Rightfully had it been said that bad faith does not simply connote bad judgment or negligence; it
imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means
breach of a known duty thru some motive or interest or ill will; it partakes of the nature of
fraud.34 Applying this precept to the given facts herein, we find that there was no "dishonest
purpose," or "some moral obliquity," or "conscious doing of wrong," or "breach of a known duty," or
"Some motive or interest or ill will" that "partakes of the nature of fraud."
Nor was it even intimated here that the NACOCO directors acted for personal reasons, or to serve
their own private interests, or to pocket money at the expense of the corporation. 35 We have had
occasion to affirm that bad faith contemplates a "state of mind affirmatively operating with furtive
design or with some motive of self-interest or ill will or for ulterior purposes." 36 Briggs vs.
Spaulding, 141 U.S. 132, 148-149, 35 L. ed. 662, 669, quotes with approval from Judge Sharswood
(in Spering's App., 71 Pa. 11), the following: "Upon a close examination of all the reported cases,

although there are many dicta not easily reconcilable, yet I have found no judgment or decree which
has held directors to account, except when they have themselves been personally guilty of some
fraud on the corporation, or have known and connived at some fraud in others, or where such fraud
might have been prevented had they given ordinary attention to their duties. . . ." Plaintiff did not
even dare charge its defendant-directors with any of these malevolent acts.
Obviously, the board thought that to jettison Kalaw's contracts would contravene basic dictates of
fairness. They did not think of raising their voice in protest against past contracts which brought in
enormous profits to the corporation. By the same token, fair dealing disagrees with the idea that
similar contracts, when unprofitable, should not merit the same treatment. Profit or loss resulting
from business ventures is no justification for turning one's back on contracts entered into. The
truth, then, of the matter is that in the words of the trial court the ratification of the contracts
was "an act of simple justice and fairness to the general manager and the best interest of the
corporation whose prestige would have been seriously impaired by a rejection by the board of
those contracts which proved disadvantageous." 37
The directors are not liable." 38
6. To what then may we trace the damage suffered by NACOCO.
The facts yield the answer. Four typhoons wreaked havoc then on our copra-producing regions.
Result: Copra production was impaired, prices spiralled, warehouses destroyed. Quick turnovers
could not be expected. NACOCO was not alone in this misfortune. The record discloses that private
traders, old, experienced, with bigger facilities, were not spared; also suffered tremendous losses.
Roughly estimated, eleven principal trading concerns did run losses to about P10,300,000.00.
Plaintiff's witness Sisenando Barretto, head of the copra marketing department of NACOCO,
observed that from late 1947 to early 1948 "there were many who lost money in the
trade." 39 NACOCO was not immune from such usual business risk.
The typhoons were known to plaintiff. In fact, NACOCO resisted the suits filed by Louis Dreyfus &
Co. by pleading in its answers force majeure as an affirmative defense and there vehemently
asserted that "as a result of the said typhoons, extensive damage was caused to the coconut trees in
the copra producing regions of the Philippines and according to estimates of competent authorities,
it will take about one year until the coconut producing regions will be able to produce their normal
coconut yield and it will take some time until the price of copra will reach normal levels;" and that
"it had never been the intention of the contracting parties in entering into the contract in question
that, in the event of a sharp rise in the price of copra in the Philippine market produce byforce
majeure or by caused beyond defendant's control, the defendant should buy the copra contracted
for at exorbitant prices far beyond the buying price of the plaintiff under the contract." 40
A high regard for formal judicial admissions made in court pleadings would suffice to deter us from
permitting plaintiff to stray away therefrom, to charge now that the damage suffered was because
of Kalaw's negligence, or for that matter, by reason of the board's ratification of the contracts. 41
Indeed, were it not for the typhoons, 42 NACOCO could have, with ease, met its contractual
obligations. Stock accessibility was no problem. NACOCO had 90 buying agencies spread
throughout the islands. It could purchase 2,000 tons of copra a day. The various contracts involved
delivery of but 16,500 tons over a five-month period. Despite the typhoons, NACOCO was still able
to deliver a little short of 50% of the tonnage required under the contracts.

As the trial court correctly observed, this is a case of damnum absque injuria. Conjunction of damage
and wrong is here absent. There cannot be an actionable wrong if either one or the other is
wanting. 43
7. On top of all these, is that no assertion is made and no proof is presented which would link
Kalaw's acts ratified by the board to a matrix for defraudation of the government. Kalaw is
clear of the stigma of bad faith. Plaintiff's corporate counsel 44 concedes that Kalaw all along thought
that he had authority to enter into the contracts, that he did so in the best interests of the
corporation; that he entered into the contracts in pursuance of an overall policy to stabilize prices,
to free the producers from the clutches of the middlemen. The prices for which NACOCO contracted
in the disputed agreements, were at a level calculated to produce profits and higher than those
prevailing in the local market. Plaintiff's witness, Barretto, categorically stated that "it would be
foolish to think that one would sign (a) contract when you are going to lose money" and that no
contract was executed "at a price unsafe for the Nacoco." 45 Really, on the basis of prices then
prevailing, NACOCO envisioned a profit of around P752,440.00. 46
Kalaw's acts were not the result of haphazard decisions either. Kalaw invariably consulted with
NACOCO's Chief Buyer, Sisenando Barretto, or the Assistant General Manager. The dailies and
quotations from abroad were guideposts to him.
Of course, Kalaw could not have been an insurer of profits. He could not be expected to predict the
coming of unpredictable typhoons. And even as typhoons supervened Kalaw was not remissed in
his duty. He exerted efforts to stave off losses. He asked the Philippine National Bank to implement
its commitment to extend a P400,000.00 loan. The bank did not release the loan, not even the sum
of P200,000.00, which, in October, 1947, was approved by the bank's board of directors. In
frustration, on December 12, 1947, Kalaw turned to the President, complained about the bank's
short-sighted policy. In the end, nothing came out of the negotiations with the bank. NACOCO
eventually faltered in its contractual obligations.
That Kalaw cannot be tagged with crassa negligentia or as much as simple negligence, would seem
to be supported by the fact that even as the contracts were being questioned in Congress and in the
NACOCO board itself, President Roxas defended the actuations of Kalaw. On December 27, 1947,
President Roxas expressed his desire "that the Board of Directors should reelect Hon. Maximo M.
Kalaw as General Manager of the National Coconut Corporation." 47 And, on January 7, 1948, at a
time when the contracts had already been openly disputed, the board, at its regular meeting,
appointed Maximo M. Kalaw as acting general manager of the corporation.
Well may we profit from the following passage from Montelibano vs. Bacolod-Murcia Milling Co., Inc.,
L-15092, May 18, 1962:
"They (the directors) hold such office charged with the duty to act for the corporation according to
their best judgment, and in so doing they cannot be controlled in the reasonable exercise and
performance of such duty. Whether the business of a corporation should be operated at a loss
during a business depression, or closed down at a smaller loss, is a purely business and economic
problem to be determined by the directors of the corporation, and not by the court. It is a well
known rule of law that questions of policy of management are left solely to the honest decision of
officers and directors of a corporation, and the court is without authority to substitute its judgment
for the judgment of the board of directors; the board is the business manager of the corporation,

and solong as it acts in good faith its orders are not reviewable by the courts." (Fletcher on
Corporations, Vol. 2, p. 390.)48
Kalaw's good faith, and that of the other directors, clinch the case for defendants. 49
Viewed in the light of the entire record, the judgment under review must be, as it is hereby,
affirmed.
Without costs. So ordered.
Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Castro and Angeles, JJ., concur.
Fernando, J., took no part.
Concepcion, C.J. and Dizon, J., are on leave.

G.R. No. 150135

October 30, 2006

SPOUSES ANTONIO F. ALGURA and LORENCITA S.J. ALGURA, petitioners,

vs.
THE LOCAL GOVERNMENT UNIT OF THE CITY OF NAGA, ATTY. MANUEL TEOXON, ENGR. LEON
PALMIANO, NATHAN SERGIO and BENJAMIN NAVARRO, SR., respondents.

DECISION

VELASCO, JR., J.:

Anyone who has ever struggled with poverty
knows how extremely expensive it is to be poor.
James Baldwin
The Constitution affords litigantsmoneyed or poorequal access to the courts; moreover, it
specifically provides that poverty shall not bar any person from having access to the
courts.1 Accordingly, laws and rules must be formulated, interpreted, and implemented pursuant to
the intent and spirit of this constitutional provision. As such, filing fees, though one of the essential
elements in court procedures, should not be an obstacle to poor litigants' opportunity to seek
redress for their grievances before the courts.
The Case

This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order of the
Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403 entitled Spouses
Antonio F. Algura and Lorencita S.J. Algura v. The Local Government Unit of the City of Naga, et al.,
dismissing the case for failure of petitioners Algura spouses to pay the required filing fees.2 Since
the instant petition involves only a question of law based on facts established from the pleadings
and documents submitted by the parties,3 the Court gives due course to the instant petition
sanctioned under Section 2(c) of Rule 41 on Appeal from the RTCs, and governed by Rule 45 of the
1997 Rules of Civil Procedure.
The Facts
On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified
Complaint dated August 30, 19994 for damages against the Naga City Government and its officers,
arising from the alleged illegal demolition of their residence and boarding house and for payment of
lost income derived from fees paid by their boarders amounting to PhP 7,000.00 monthly.
Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants,5 to which
petitioner Antonio Algura's Pay Slip No. 2457360 (Annex "A" of motion) was appended, showing a
gross monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP 10,474.00) and a
net pay of Three Thousand Six Hundred Sixteen Pesos and Ninety Nine Centavos (PhP 3,616.99) for
[the month of] July 1999.6 Also attached as Annex "B" to the motion was a July 14, 1999
Certification7 issued by the Office of the City Assessor of Naga City, which stated that petitioners
had no property declared in their name for taxation purposes.
Finding that petitioners' motion to litigate as indigent litigants was meritorious, Executive Judge
Jose T. Atienza of the Naga City RTC, in the September 1, 1999 Order,8 granted petitioners' plea for
exemption from filing fees.
Meanwhile, as a result of respondent Naga City Government's demolition of a portion of petitioners'
house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their boarders' rentals.
With the loss of the rentals, the meager income from Lorencita Algura's sari-sari store and Antonio
Algura's small take home pay became insufficient for the expenses of the Algura spouses and their
six (6) children for their basic needs including food, bills, clothes, and schooling, among others.
On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10,
1999,9 arguing that the defenses of the petitioners in the complaint had no cause of action, the
spouses' boarding house blocked the road right of way, and said structure was a nuisance per se.
Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed their
Reply with Ex-Parte Request for a Pre-Trial Setting10 before the Naga City RTC on October 19, 1999.
On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days within which
to file a Motion to Disqualify Petitioners as Indigent Litigants.
On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of Filing
Fees dated March 10, 2000.11 They asserted that in addition to the more than PhP 3,000.00 net
income of petitioner Antonio Algura, who is a member of the Philippine National Police, spouse
Lorencita Algura also had a mini-store and a computer shop on the ground floor of their residence
along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that petitioners' second floor was
used as their residence and as a boarding house, from which they earned more than PhP 3,000.00 a

month. In addition, it was claimed that petitioners derived additional income from their computer
shop patronized by students and from several boarders who paid rentals to them. Hence,
respondents concluded that petitioners were not indigent litigants.
On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion12 to
respondents' motion to disqualify them for non-payment of filing fees.
On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent litigants
on the ground that they failed to substantiate their claim for exemption from payment of legal fees
and to comply with the third paragraph of Rule 141, Section 18 of the Revised Rules of Court
directing them to pay the requisite filing fees.13
On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order. On
May 8, 2000, respondents then filed their Comment/Objections to petitioner's Motion for
Reconsideration.
On May 5, 2000, the trial court issued an Order14 giving petitioners the opportunity to comply with
the requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants.
On May 13, 2000, petitioners submitted their Compliance15 attaching the affidavits of petitioner
Lorencita Algura16 and Erlinda Bangate,17 to comply with the requirements of then Rule 141,
Section 18 of the Rules of Court and in support of their claim to be declared as indigent litigants.
In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their small
dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her husband, and their
six (6) minor children had to rely mainly on her husband's salary as a policeman which provided
them a monthly amount of PhP 3,500.00, more or less. Also, they did not own any real property as
certified by the assessor's office of Naga City. More so, according to her, the meager net income
from her small sari-sari store and the rentals of some boarders, plus the salary of her husband,
were not enough to pay the family's basic necessities.
To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit of
Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura and
Lorencita Algura, who were her neighbors; that they derived substantial income from their
boarders; that they lost said income from their boarders' rentals when the Local Government Unit
of the City of Naga, through its officers, demolished part of their house because from that time, only
a few boarders could be accommodated; that the income from the small store, the boarders, and the
meager salary of Antonio Algura were insufficient for their basic necessities like food and clothing,
considering that the Algura spouses had six (6) children; and that she knew that petitioners did not
own any real property.
Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17,
200018 Order denying the petitioners' Motion for Reconsideration.
Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the "GROSS INCOME
or TOTAL EARNINGS of plaintiff Algura [was] 10,474.00 which amount [was] over and above the
amount mentioned in the first paragraph of Rule 141, Section 18 for pauper litigants residing
outside Metro Manila."19 Said rule provides that the gross income of the litigant should not exceed
PhP 3,000.00 a month and shall not own real estate with an assessed value of PhP 50,000.00. The

trial court found that, in Lorencita S.J. Algura's May 13, 2000 Affidavit, nowhere was it stated that
she and her immediate family did not earn a gross income of PhP 3,000.00.
The Issue
Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue for
the consideration of the Court: whether petitioners should be considered as indigent litigants who
qualify for exemption from paying filing fees.
The Ruling of the Court
The petition is meritorious.
A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is necessary
before the Court rules on the issue of the Algura spouses' claim to exemption from paying filing
fees.
When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found in
Rule 3, Section 22 which provided that:
Section 22. Pauper litigant.Any court may authorize a litigant to prosecute his action or
defense as a pauper upon a proper showing that he has no means to that effect by affidavits,
certificate of the corresponding provincial, city or municipal treasurer, or otherwise. Such
authority[,] once given[,] shall include an exemption from payment of legal fees and from
filing appeal bond, printed record and printed brief. The legal fees shall be a lien to any
judgment rendered in the case [favorable] to the pauper, unless the court otherwise
provides.
From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any
provision on pauper litigants.
On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0 (formerly G.R. No. 64274),
approved the recommendation of the Committee on the Revision of Rates and Charges of Court
Fees, through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141 of the Rules
of Court to generate funds to effectively cover administrative costs for services rendered by the
courts.20 A provision on pauper litigants was inserted which reads:
Section 16. Pauper-litigants exempt from payment of court fees.Pauper-litigants include
wage earners whose gross income do not exceed P2,000.00 a month or P24,000.00 a year
for those residing in Metro Manila, and P1,500.00 a month or P18,000.00 a year for those
residing outside Metro Manila, or those who do not own real property with an assessed
value of not more than P24,000.00, or not more than P18,000.00 as the case may be.
Such exemption shall include exemption from payment of fees for filing appeal bond,
printed record and printed brief.
The legal fees shall be a lien on the monetary or property judgment rendered in favor of the
pauper-litigant.

To be entitled to the exemption herein provided, the pauper-litigant shall execute an

affidavit that he does not earn the gross income abovementioned, nor own any real
property with the assessed value afore-mentioned [sic], supported by a certification to that
effect by the provincial, city or town assessor or treasurer.
When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil Procedure
(inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated April 8, 1997,
which became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules of Court was
superseded by Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as follows:
Section 21. Indigent party.A party may be authorized to litigate his action, claim or
defense as an indigent if the court, upon an ex parte application and hearing, is satisfied that
the party is one who has no money or property sufficient and available for food, shelter and
basic necessities for himself and his family.
Such authority shall include an exemption from payment of docket and other lawful fees,
and of transcripts of stenographic notes which the court may order to be furnished him. The
amount of the docket and other lawful fees which the indigent was exempted from paying
shall be a lien on any judgment rendered in the case favorable to the indigent, unless the
court otherwise provides.
Any adverse party may contest the grant of such authority at any time before judgment is
rendered by the trial court. If the court should determine after hearing that the party
declared as an indigent is in fact a person with sufficient income or property, the proper
docket and other lawful fees shall be assessed and collected by the clerk of court. If payment
is not made within the time fixed by the court, execution shall issue for the payment thereof,
without prejudice to such other sanctions as the court may impose.
At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803,
however, there was no amendment made on Rule 141, Section 16 on pauper litigants.
On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC,
whereby certain fees were increased or adjusted. In this Resolution, the Court amended Section 16
of Rule 141, making it Section 18, which now reads:
Section 18. Pauper-litigants exempt from payment of legal fees.Pauper litigants (a) whose
gross income and that of their immediate family do not exceed four thousand (P4,000.00)
pesos a month if residing in Metro Manila, and three thousand (P3,000.00) pesos a month if
residing outside Metro Manila, and (b) who do not own real property with an assessed
value of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of
legal fees.
The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper
litigant, unless the court otherwise provides.
To be entitled to the exemption herein provided, the litigant shall execute an affidavit that
he and his immediate family do not earn the gross income abovementioned, nor do they
own any real property with the assessed value aforementioned, supported by an affidavit of
a disinterested person attesting to the truth of the litigant's affidavit.

Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to
strike out the pleading of that party, without prejudice to whatever criminal liability may
have been incurred.
It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without revoking
or amendingSection 21 of Rule 3, which provides for the exemption of pauper litigants from
payment of filing fees. Thus, on March 1, 2000, there were two existing rules on pauper litigants;
namely, Rule 3, Section 21 and Rule 141, Section 18.
On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No. 042-04-SC, which became effective on the same date. It then became Section 19 of Rule 141, to wit:
Sec. 19. Indigent litigants exempt from payment of legal fees. INDIGENT LITIGANTS
(A) WHOSE GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT
EXCEED AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN EMPLOYEE AND
(B) WHO DO NOT OWN REAL PROPERTY WITH A FAIR MARKET VALUE AS STATED IN THE
CURRENT TAX DECLARATION OF MORE THAN THREE HUNDRED THOUSAND
(P300,000.00) PESOS SHALL BE EXEMPT FROM PAYMENT OF LEGAL FEES.
The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent
litigant unless the court otherwise provides.
To be entitled to the exemption herein provided, the litigant shall execute an affidavit
that he and his immediate family do not earn a gross income abovementioned, and
they do not own any real property with the fair value aforementioned, supported by
an affidavit of a disinterested person attesting to the truth of the litigant's affidavit.
The current tax declaration, if any, shall be attached to the litigant's affidavit.
Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to
dismiss the complaint or action or to strike out the pleading of that party, without prejudice
to whatever criminal liability may have been incurred. (Emphasis supplied.)
Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to
implement RA 9227 which brought about new increases in filing fees. Specifically, in the August 16,
2004 amendment, the ceiling for the gross income of litigants applying for exemption and that of
their immediate family was increased from PhP 4,000.00 a month in Metro Manila and PhP
3,000.00 a month outside Metro Manila, to double the monthly minimum wage of an employee; and
the maximum value of the property owned by the applicant was increased from an assessed value
of PhP 50,000.00 to a maximum market value of PhP 300,000.00, to be able to accommodate more
indigent litigants and promote easier access to justice by the poor and the marginalized in the wake
of these new increases in filing fees.
Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment or
recall of Rule 3, Section 21 on indigent litigants.
With this historical backdrop, let us now move on to the sole issuewhether petitioners are
exempt from the payment of filing fees.

It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999.
However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly applied
Rule 141, Section 18 on Legal Fees when the applicable rules at that time were Rule 3, Section 21
on Indigent Party which took effect on July 1, 1997 and Rule 141, Section 16 on Pauper
Litigants which became effective on July 19, 1984 up to February 28, 2000.
The old Section 16, Rule 141 requires applicants to file an ex-parte motion to litigate as a pauper
litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00 a month or
PhP 24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month or PhP
18,000.00 a year for those residing outside Metro Manila or those who do not own real property
with an assessed value of not more than PhP 24,000.00 or not more than PhP 18,000.00 as the case
may be. Thus, there are two requirements: a) income requirementthe applicants should not have
a gross monthly income of more than PhP 1,500.00, and b) property requirementthey should not
own property with an assessed value of not more than PhP 18,000.00.
In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura and
neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross monthly
income of PhP 10,474.00,21 and a Certification of the Naga City assessor stating that petitioners do
not have property declared in their names for taxation.22 Undoubtedly, petitioners do not own real
property as shown by the Certification of the Naga City assessor and so the property requirement is
met. However with respect to the income requirement, it is clear that the gross monthly income of
PhP 10,474.00 of petitioner Antonio F. Algura and the PhP 3,000.00 income of Lorencita Algura
when combined, were above the PhP 1,500.00 monthly income threshold prescribed by then Rule
141, Section 16 and therefore, the income requirement was not satisfied. The trial court was
therefore correct in disqualifying petitioners Alguras as indigent litigants although the court should
have applied Rule 141, Section 16 which was in effect at the time of the filing of the application on
September 1, 1999. Even if Rule 141, Section 18 (which superseded Rule 141, Section 16 on March
1, 2000) were applied, still the application could not have been granted as the combined PhP
13,474.00 income of petitioners was beyond the PhP 3,000.00 monthly income threshold.
Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14, 2000
Order disqualifying them as indigent litigants23 that the rules have been relaxed by relying on Rule
3, Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate their action as
indigents if the court is satisfied that the party is "one who has no money or property sufficient and
available for food, shelter and basic necessities for himself and his family." The trial court did not
give credence to this view of petitioners and simply applied Rule 141 but ignored Rule 3, Section 21
on Indigent Party.
The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate as
indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule 141,
Section 16 and Rule 3, Section 21 on such applications or should the court apply only Rule 141,
Section 16 and discard Rule 3, Section 21 as having been superseded by Rule 141, Section 16 on
Legal Fees.
The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141,
Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August 16,
2003, which is now the present rule) are still valid and enforceable rules on indigent litigants.

For one, the history of the two seemingly conflicting rules readily reveals that it was not the intent
of the Court to consider the old Section 22 of Rule 3, which took effect on January 1, 1994 to have
been amended and superseded by Rule 141, Section 16, which took effect on July 19, 1984 through
A.M. No. 83-6-389-0. If that is the case, then the Supreme Court, upon the recommendation of the
Committee on the Revision on Rules, could have already deleted Section 22 from Rule 3 when it
amended Rules 1 to 71 and approved the 1997 Rules of Civil Procedure, which took effect on July 1,
1997. The fact that Section 22 which became Rule 3, Section 21 on indigent litigant was retained in
the rules of procedure, even elaborating on the meaning of an indigent party, and was also
strengthened by the addition of a third paragraph on the right to contest the grant of authority to
litigate only goes to show that there was no intent at all to consider said rule as expunged from the
1997 Rules of Civil Procedure.
Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and the
second on August 16, 2004; and yet, despite these two amendments, there was no attempt to delete
Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain the two (2)
rules on indigent litigants to cover applications to litigate as an indigent litigant.
It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and 2004
amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals are frowned
upon unless the intent of the framers of the rules is unequivocal. It has been consistently ruled that:
(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that
the legislature so intended. As laws are presumed to be passed with deliberation and with
full knowledge of all existing ones on the subject, it is but reasonable to conclude that in
passing a statute[,] it was not intended to interfere with or abrogate any former law relating
to same matter, unless the repugnancy between the two is not only irreconcilable, but also
clear and convincing, and flowing necessarily from the language used, unless the later act
fully embraces the subject matter of the earlier, or unless the reason for the earlier act is
beyond peradventure removed. Hence, every effort must be used to make all acts stand and
if, by any reasonableconstruction they can be reconciled, the later act will not operate as a
repeal of the earlier.24 (Emphasis supplied).
Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by Section
18 and later Section 19 of Rule 141, the Court finds that the two rules can and should be
harmonized.
The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled
principle that when conflicts are seen between two provisions, all efforts must be made to
harmonize them. Hence, "every statute [or rule] must be so construed and harmonized with other
statutes [or rules] as to form a uniform system of jurisprudence."25
In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation of
seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus ruled:
Consequently, every statute should be construed in such a way that will harmonize it with
existing laws. This principle is expressed in the legal maxim 'interpretare et concordare leges
legibus est optimus interpretandi,' that is, to interpret and to do it in such a way as to
harmonize laws with laws is the best method of interpretation.26

In the light of the foregoing considerations, therefore, the two (2) rules can stand together and are
compatible with each other. When an application to litigate as an indigent litigant is filed, the court
shall scrutinize the affidavits and supporting documents submitted by the applicant to determine if
the applicant complies with the income and property standards prescribed in the present Section
19 of Rule 141that is, the applicant's gross income and that of the applicant's immediate family
do not exceed an amount double the monthly minimum wage of an employee; and the applicant
does not own real property with a fair market value of more than Three Hundred Thousand Pesos
(PhP 300,000.00). If the trial court finds that the applicant meets the income and property
requirements, the authority to litigate as indigent litigant is automatically granted and the grant is a
matter of right.
However, if the trial court finds that one or both requirements have not been met, then it would set
a hearing to enable the applicant to prove that the applicant has "no money or property sufficient
and available for food, shelter and basic necessities for himself and his family." In that hearing, the
adverse party may adduce countervailing evidence to disprove the evidence presented by the
applicant; after which the trial court will rule on the application depending on the evidence
adduced. In addition, Section 21 of Rule 3 also provides that the adverse party may later still
contest the grant of such authority at any time before judgment is rendered by the trial court,
possibly based on newly discovered evidence not obtained at the time the application was heard. If
the court determines after hearing, that the party declared as an indigent is in fact a person with
sufficient income or property, the proper docket and other lawful fees shall be assessed and
collected by the clerk of court. If payment is not made within the time fixed by the court, execution
shall issue or the payment of prescribed fees shall be made, without prejudice to such other
sanctions as the court may impose.
The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section 21
does not clearly draw the limits of the entitlement to the exemption. Knowing that the litigants may
abuse the grant of authority, the trial court must use sound discretion and scrutinize evidence
strictly in granting exemptions, aware that the applicant has not hurdled the precise standards
under Rule 141. The trial court must also guard against abuse and misuse of the privilege to litigate
as an indigent litigant to prevent the filing of exorbitant claims which would otherwise be regulated
by a legal fee requirement.
Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras after
their affidavits and supporting documents showed that petitioners did not satisfy the twin
requirements on gross monthly income and ownership of real property under Rule 141. Instead of
disqualifying the Alguras as indigent litigants, the trial court should have called a hearing as
required by Rule 3, Section 21 to enable the petitioners to adduce evidence to show that they didn't
have property and money sufficient and available for food, shelter, and basic necessities for them
and their family.27 In that hearing, the respondents would have had the right to also present
evidence to refute the allegations and evidence in support of the application of the petitioners to
litigate as indigent litigants. Since this Court is not a trier of facts, it will have to remand the case to
the trial court to determine whether petitioners can be considered as indigent litigants using the
standards set in Rule 3, Section 21.
Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets the
salary and property requirements under Section 19 of Rule 141, then the grant of the application is
mandatory. On the other hand, when the application does not satisfy one or both requirements,
then the application should not be denied outright; instead, the court should apply the "indigency

test" under Section 21 of Rule 3 and use its sound discretion in determining the merits of the prayer
for exemption.
Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987
Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief Justice
Hilario G. Davide, Jr., placed prime importance on 'easy access to justice by the poor' as one of its six
major components. Likewise, the judicial philosophy of Liberty and Prosperity of Chief Justice
Artemio V. Panganiban makes it imperative that the courts shall not only safeguard but also
enhance the rights of individualswhich are considered sacred under the 1987 Constitution.
Without doubt, one of the most precious rights which must be shielded and secured is the
unhampered access to the justice system by the poor, the underprivileged, and the marginalized.
WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the disqualification
of petitioners, the July 17, 2000 Order denying petitioners' Motion for Reconsideration, and the
September 11, 2001 Order dismissing the case in Civil Case No. RTC-99-4403 before the Naga City
RTC, Branch 27 are ANNULLED andSET ASIDE. Furthermore, the Naga City RTC is ordered to set
the "Ex-Parte Motion to Litigate as Indigent Litigants" for hearing and apply Rule 3, Section 21 of
the 1997 Rules of Civil Procedure to determine whether petitioners can qualify as indigent litigants.
No costs.
SO ORDERED.

G.R. No. 122846

January 20, 2009

WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA TOURIST &
DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM, Respondent.
DECISION
Tinga, J.:
With another city ordinance of Manila also principally involving the tourist district as subject, the
Court is confronted anew with the incessant clash between government power and individual
liberty in tandem with the archetypal tension between law and morality.
In City of Manila v. Laguio, Jr.,1 the Court affirmed the nullification of a city ordinance barring the
operation of motels and inns, among other establishments, within the Ermita-Malate area. The
petition at bar assails a similarly-motivated city ordinance that prohibits those same
establishments from offering short-time admission, as well as pro-rated or "wash up" rates for such
abbreviated stays. Our earlier decision tested the city ordinance against our sacred constitutional

rights to liberty, due process and equal protection of law. The same parameters apply to the present
petition.
This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks the reversal of
the Decision3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals, challenges the validity of Manila
City Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time Admission, Short-Time
Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns, Lodging Houses, Pension
Houses, and Similar Establishments in the City of Manila" (the Ordinance).
I.
The facts are as follows:
On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the Ordinance.4 The
Ordinance is reproduced in full, hereunder:
SECTION 1. Declaration of Policy. It is hereby the declared policy of the City Government to protect
the best interest, health and welfare, and the morality of its constituents in general and the youth in
particular.
SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting short time admission in
hotels, motels, lodging houses, pension houses and similar establishments in the City of Manila.
SEC. 3. Pursuant to the above policy, short-time admission and rate [sic], wash-up rate or other
similarly concocted terms, are hereby prohibited in hotels, motels, inns, lodging houses, pension
houses and similar establishments in the City of Manila.
SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance and charging of room
rate for less than twelve (12) hours at any given time or the renting out of rooms more than twice a
day or any other term that may be concocted by owners or managers of said establishments but
would mean the same or would bear the same meaning.
SEC. 5. Penalty Clause. Any person or corporation who shall violate any provision of this ordinance
shall upon conviction thereof be punished by a fine of Five Thousand (P5,000.00) Pesos or
imprisonment for a period of not exceeding one (1) year or both such fine and imprisonment at the
discretion of the court; Provided, That in case of [a] juridical person, the president, the manager, or
the persons in charge of the operation thereof shall be liable: Provided, further, That in case of
subsequent conviction for the same offense, the business license of the guilty party shall
automatically be cancelled.
SEC. 6. Repealing Clause. Any or all provisions of City ordinances not consistent with or contrary to
this measure or any portion hereof are hereby deemed repealed.
SEC. 7. Effectivity. This ordinance shall take effect immediately upon approval.
Enacted by the city Council of Manila at its regular session today, November 10, 1992.
Approved by His Honor, the Mayor on December 3, 1992.

On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed a complaint
for declaratory relief with prayer for a writ of preliminary injunction and/or temporary restraining
order ( TRO)5 with the Regional Trial Court (RTC) of Manila, Branch 9 impleading as defendant,
herein respondent City of Manila (the City) represented by Mayor Lim.6 MTDC prayed that the
Ordinance, insofar as it includes motels and inns as among its prohibited establishments, be
declared invalid and unconstitutional. MTDC claimed that as owner and operator of the Victoria
Court in Malate, Manila it was authorized by Presidential Decree (P.D.) No. 259 to admit customers
on a short time basis as well as to charge customers wash up rates for stays of only three hours.
On December 21, 1992, petitioners White Light Corporation (WLC), Titanium Corporation (TC) and
Sta. Mesa Tourist and Development Corporation (STDC) filed a motion to intervene and to admit
attached complaint-in-intervention7 on the ground that the Ordinance directly affects their
business interests as operators of drive-in-hotels and motels in Manila.8 The three companies are
components of the Anito Group of Companies which owns and operates several hotels and motels
in Metro Manila.9
On December 23, 1992, the RTC granted the motion to intervene.10 The RTC also notified the
Solicitor General of the proceedings pursuant to then Rule 64, Section 4 of the Rules of Court. On the
same date, MTDC moved to withdraw as plaintiff.11
On December 28, 1992, the RTC granted MTDC's motion to withdraw.12 The RTC issued a TRO on
January 14, 1993, directing the City to cease and desist from enforcing the Ordinance.13 The City
filed an Answer dated January 22, 1993 alleging that the Ordinance is a legitimate exercise of police
power.14
On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to desist
from the enforcement of the Ordinance.15 A month later, on March 8, 1993, the Solicitor General
filed his Comment arguing that the Ordinance is constitutional.
During the pre-trial conference, the WLC, TC and STDC agreed to submit the case for decision
without trial as the case involved a purely legal question.16 On October 20, 1993, the RTC rendered
a decision declaring the Ordinance null and void. The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the City of Manila is hereby
declared null and void.
Accordingly, the preliminary injunction heretofor issued is hereby made permanent.
SO ORDERED.17
The RTC noted that the ordinance "strikes at the personal liberty of the individual guaranteed and
jealously guarded by the Constitution."18 Reference was made to the provisions of the Constitution
encouraging private enterprises and the incentive to needed investment, as well as the right to
operate economic enterprises. Finally, from the observation that the illicit relationships the
Ordinance sought to dissuade could nonetheless be consummated by simply paying for a 12-hour
stay, the RTC likened the law to the ordinance annulled in Ynot v. Intermediate Appellate
Court,19 where the legitimate purpose of preventing indiscriminate slaughter of carabaos was
sought to be effected through an inter-province ban on the transport of carabaos and carabeef.

The City later filed a petition for review on certiorari with the Supreme Court.20 The petition was
docketed as G.R. No. 112471. However in a resolution dated January 26, 1994, the Court treated the
petition as a petition forcertiorari and referred the petition to the Court of Appeals.21
Before the Court of Appeals, the City asserted that the Ordinance is a valid exercise of police power
pursuant to Section 458 (4)(iv) of the Local Government Code which confers on cities, among other
local government units, the power:
[To] regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses,
hotels, motels, inns, pension houses, lodging houses and other similar establishments, including
tourist guides and transports.22
The Ordinance, it is argued, is also a valid exercise of the power of the City under Article III, Section
18(kk) of the Revised Manila Charter, thus:
"to enact all ordinances it may deem necessary and proper for the sanitation and safety, the
furtherance of the prosperity and the promotion of the morality, peace, good order, comfort,
convenience and general welfare of the city and its inhabitants, and such others as be necessary to
carry into effect and discharge the powers and duties conferred by this Chapter; and to fix penalties
for the violation of ordinances which shall not exceed two hundred pesos fine or six months
imprisonment, or both such fine and imprisonment for a single offense.23
Petitioners argued that the Ordinance is unconstitutional and void since it violates the right to
privacy and the freedom of movement; it is an invalid exercise of police power; and it is an
unreasonable and oppressive interference in their business.
The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality of the
Ordinance.24First, it held that the Ordinance did not violate the right to privacy or the freedom of
movement, as it only penalizes the owners or operators of establishments that admit individuals for
short time stays. Second, the virtually limitless reach of police power is only constrained by having
a lawful object obtained through a lawful method. The lawful objective of the Ordinance is satisfied
since it aims to curb immoral activities. There is a lawful method since the establishments are still
allowed to operate. Third, the adverse effect on the establishments is justified by the well-being of
its constituents in general. Finally, as held in Ermita-Malate Motel Operators Association v. City
Mayor of Manila, liberty is regulated by law.
TC, WLC and STDC come to this Court via petition for review on certiorari.25 In their petition and
Memorandum, petitioners in essence repeat the assertions they made before the Court of Appeals.
They contend that the assailed Ordinance is an invalid exercise of police power.
II.
We must address the threshold issue of petitioners standing. Petitioners allege that as owners of
establishments offering "wash-up" rates, their business is being unlawfully interfered with by the
Ordinance. However, petitioners also allege that the equal protection rights of their clients are also
being interfered with. Thus, the crux of the matter is whether or not these establishments have the
requisite standing to plead for protection of their patrons' equal protection rights.

Standing or locus standi is the ability of a party to demonstrate to the court sufficient connection to
and harm from the law or action challenged to support that party's participation in the case. More
importantly, the doctrine of standing is built on the principle of separation of powers,26 sparing as it
does unnecessary interference or invalidation by the judicial branch of the actions rendered by its
co-equal branches of government.
The requirement of standing is a core component of the judicial system derived directly from the
Constitution.27The constitutional component of standing doctrine incorporates concepts which
concededly are not susceptible of precise definition.28 In this jurisdiction, the extancy of "a direct
and personal interest" presents the most obvious cause, as well as the standard test for a
petitioner's standing.29 In a similar vein, the United States Supreme Court reviewed and elaborated
on the meaning of the three constitutional standing requirements of injury, causation, and
redressability in Allen v. Wright.30
Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth
doctrine, taxpayer suits, third party standing and, especially in the Philippines, the doctrine of
transcendental importance.31
For this particular set of facts, the concept of third party standing as an exception and the
overbreadth doctrine are appropriate. In Powers v. Ohio,32 the United States Supreme Court wrote
that: "We have recognized the right of litigants to bring actions on behalf of third parties, provided
three important criteria are satisfied: the litigant must have suffered an injury-in-fact, thus giving
him or her a "sufficiently concrete interest" in the outcome of the issue in dispute; the litigant must
have a close relation to the third party; and there must exist some hindrance to the third party's
ability to protect his or her own interests."33 Herein, it is clear that the business interests of the
petitioners are likewise injured by the Ordinance. They rely on the patronage of their customers for
their continued viability which appears to be threatened by the enforcement of the Ordinance. The
relative silence in constitutional litigation of such special interest groups in our nation such as the
American Civil Liberties Union in the United States may also be construed as a hindrance for
customers to bring suit.34
American jurisprudence is replete with examples where parties-in-interest were allowed standing
to advocate or invoke the fundamental due process or equal protection claims of other persons or
classes of persons injured by state action. In Griswold v. Connecticut,35 the United States Supreme
Court held that physicians had standing to challenge a reproductive health statute that would
penalize them as accessories as well as to plead the constitutional protections available to their
patients. The Court held that:
"The rights of husband and wife, pressed here, are likely to be diluted or adversely affected unless
those rights are considered in a suit involving those who have this kind of confidential relation to
them."36
An even more analogous example may be found in Craig v. Boren,37 wherein the United States
Supreme Court held that a licensed beverage vendor has standing to raise the equal protection
claim of a male customer challenging a statutory scheme prohibiting the sale of beer to males under
the age of 21 and to females under the age of 18. The United States High Court explained that the
vendors had standing "by acting as advocates of the rights of third parties who seek access to their
market or function."38

Assuming arguendo that petitioners do not have a relationship with their patrons for the former to
assert the rights of the latter, the overbreadth doctrine comes into play. In overbreadth analysis,
challengers to government actionare in effect permitted to raise the rights of third parties.
Generally applied to statutes infringing on the freedom of speech, the overbreadth doctrine applies
when a statute needlessly restrains even constitutionally guaranteed rights.39 In this case, the
petitioners claim that the Ordinance makes a sweeping intrusion into the right to liberty of their
clients. We can see that based on the allegations in the petition, the Ordinance suffers from
overbreadth.
We thus recognize that the petitioners have a right to assert the constitutional rights of their clients
to patronize their establishments for a "wash-rate" time frame.
III.
To students of jurisprudence, the facts of this case will recall to mind not only the recent City of
Manila ruling, but our 1967 decision in Ermita-Malate Hotel and Motel Operations Association, Inc., v.
Hon. City Mayor of Manila.40Ermita-Malate concerned the City ordinance requiring patrons to fill up
a prescribed form stating personal information such as name, gender, nationality, age, address and
occupation before they could be admitted to a motel, hotel or lodging house. This earlier ordinance
was precisely enacted to minimize certain practices deemed harmful to public morals. A purpose
similar to the annulled ordinance in City of Manila which sought a blanket ban on motels, inns and
similar establishments in the Ermita-Malate area. However, the constitutionality of the ordinance
in Ermita-Malate was sustained by the Court.
The common thread that runs through those decisions and the case at bar goes beyond the
singularity of the localities covered under the respective ordinances. All three ordinances were
enacted with a view of regulating public morals including particular illicit activity in transient
lodging establishments. This could be described as the middle case, wherein there is no wholesale
ban on motels and hotels but the services offered by these establishments have been severely
restricted. At its core, this is another case about the extent to which the State can intrude into and
regulate the lives of its citizens.
The test of a valid ordinance is well established. A long line of decisions including City of Manila has
held that for an ordinance to be valid, it must not only be within the corporate powers of the local
government unit to enact and pass according to the procedure prescribed by law, it must also
conform to the following substantive requirements: (1) must not contravene the Constitution or
any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4)
must not prohibit but may regulate trade; (5) must be general and consistent with public policy;
and (6) must not be unreasonable.41
The Ordinance prohibits two specific and distinct business practices, namely wash rate admissions
and renting out a room more than twice a day. The ban is evidently sought to be rooted in the police
power as conferred on local government units by the Local Government Code through such
implements as the general welfare clause.
A.
Police power, while incapable of an exact definition, has been purposely veiled in general terms to
underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient

and flexible response as the conditions warrant.42 Police power is based upon the concept of
necessity of the State and its corresponding right to protect itself and its people.43 Police power has
been used as justification for numerous and varied actions by the State. These range from the
regulation of dance halls,44 movie theaters,45 gas stations46 and cockpits.47 The awesome scope of
police power is best demonstrated by the fact that in its hundred or so years of presence in our
nations legal system, its use has rarely been denied.
The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered
establishments for illicit sex, prostitution, drug use and alike. These goals, by themselves, are
unimpeachable and certainly fall within the ambit of the police power of the State. Yet the
desirability of these ends do not sanctify any and all means for their achievement. Those means
must align with the Constitution, and our emerging sophisticated analysis of its guarantees to the
people. The Bill of Rights stands as a rebuke to the seductive theory of Macchiavelli, and, sometimes
even, the political majorities animated by his cynicism.
Even as we design the precedents that establish the framework for analysis of due process or equal
protection questions, the courts are naturally inhibited by a due deference to the co-equal branches
of government as they exercise their political functions. But when we are compelled to nullify
executive or legislative actions, yet another form of caution emerges. If the Court were animated by
the same passing fancies or turbulent emotions that motivate many political decisions, judicial
integrity is compromised by any perception that the judiciary is merely the third political branch of
government. We derive our respect and good standing in the annals of history by acting as judicious
and neutral arbiters of the rule of law, and there is no surer way to that end than through the
development of rigorous and sophisticated legal standards through which the courts analyze the
most fundamental and far-reaching constitutional questions of the day.
B.
The primary constitutional question that confronts us is one of due process, as guaranteed under
Section 1, Article III of the Constitution. Due process evades a precise definition.48 The purpose of
the guaranty is to prevent arbitrary governmental encroachment against the life, liberty and
property of individuals. The due process guaranty serves as a protection against arbitrary
regulation or seizure. Even corporations and partnerships are protected by the guaranty insofar as
their property is concerned.
The due process guaranty has traditionally been interpreted as imposing two related but distinct
restrictions on government, "procedural due process" and "substantive due process." Procedural
due process refers to the procedures that the government must follow before it deprives a person
of life, liberty, or property.49 Procedural due process concerns itself with government action
adhering to the established process when it makes an intrusion into the private sphere. Examples
range from the form of notice given to the level of formality of a hearing.
If due process were confined solely to its procedural aspects, there would arise absurd situation of
arbitrary government action, provided the proper formalities are followed. Substantive due process
completes the protection envisioned by the due process clause. It inquires whether the government
has sufficient justification for depriving a person of life, liberty, or property.50
The question of substantive due process, moreso than most other fields of law, has reflected
dynamism in progressive legal thought tied with the expanded acceptance of fundamental

freedoms. Police power, traditionally awesome as it may be, is now confronted with a more
rigorous level of analysis before it can be upheld. The vitality though of constitutional due process
has not been predicated on the frequency with which it has been utilized to achieve a liberal result
for, after all, the libertarian ends should sometimes yield to the prerogatives of the State. Instead,
the due process clause has acquired potency because of the sophisticated methodology that has
emerged to determine the proper metes and bounds for its application.
C.
The general test of the validity of an ordinance on substantive due process grounds is best tested
when assessed with the evolved footnote 4 test laid down by the U.S. Supreme Court in U.S. v.
Carolene Products.51 Footnote 4 of the Carolene Products case acknowledged that the judiciary
would defer to the legislature unless there is a discrimination against a "discrete and insular"
minority or infringement of a "fundamental right."52 Consequently, two standards of judicial review
were established: strict scrutiny for laws dealing with freedom of the mind or restricting the
political process, and the rational basis standard of review for economic legislation.
A third standard, denominated as heightened or immediate scrutiny, was later adopted by the U.S.
Supreme Court for evaluating classifications based on gender53 and legitimacy.54 Immediate
scrutiny was adopted by the U.S. Supreme Court in Craig,55 after the Court declined to do so in Reed
v. Reed.56 While the test may have first been articulated in equal protection analysis, it has in the
United States since been applied in all substantive due process cases as well.
We ourselves have often applied the rational basis test mainly in analysis of equal protection
challenges.57 Using the rational basis examination, laws or ordinances are upheld if they rationally
further a legitimate governmental interest.58 Under intermediate review, governmental interest is
extensively examined and the availability of less restrictive measures is considered.59 Applying
strict scrutiny, the focus is on the presence of compelling, rather than substantial, governmental
interest and on the absence of less restrictive means for achieving that interest.
In terms of judicial review of statutes or ordinances, strict scrutiny refers to the standard for
determining the quality and the amount of governmental interest brought to justify the regulation
of fundamental freedoms.60 Strict scrutiny is used today to test the validity of laws dealing with the
regulation of speech, gender, or race as well as other fundamental rights as expansion from its
earlier applications to equal protection.61 The United States Supreme Court has expanded the scope
of strict scrutiny to protect fundamental rights such as suffrage,62 judicial access63 and interstate
travel.64
If we were to take the myopic view that an Ordinance should be analyzed strictly as to its effect only
on the petitioners at bar, then it would seem that the only restraint imposed by the law which we
are capacitated to act upon is the injury to property sustained by the petitioners, an injury that
would warrant the application of the most deferential standard the rational basis test. Yet as
earlier stated, we recognize the capacity of the petitioners to invoke as well the constitutional rights
of their patrons those persons who would be deprived of availing short time access or wash-up
rates to the lodging establishments in question.
Viewed cynically, one might say that the infringed rights of these customers were are trivial since
they seem shorn of political consequence. Concededly, these are not the sort of cherished rights
that, when proscribed, would impel the people to tear up their cedulas. Still, the Bill of Rights does

not shelter gravitas alone. Indeed, it is those "trivial" yet fundamental freedoms which the people
reflexively exercise any day without the impairing awareness of their constitutional consequence
that accurately reflect the degree of liberty enjoyed by the people. Liberty, as integrally
incorporated as a fundamental right in the Constitution, is not a Ten Commandments-style
enumeration of what may or what may not be done; but rather an atmosphere of freedom where
the people do not feel labored under a Big Brother presence as they interact with each other, their
society and nature, in a manner innately understood by them as inherent, without doing harm or
injury to others.
D.
The rights at stake herein fall within the same fundamental rights to liberty which we upheld in City
of Manila v. Hon. Laguio, Jr. We expounded on that most primordial of rights, thus:
Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to
exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into
mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the
right of man to enjoy the facilities with which he has been endowed by his Creator, subject only to
such restraint as are necessary for the common welfare."[65] In accordance with this case, the rights
of the citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn
his livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the
concept of liberty.[66]
The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the meaning of
"liberty." It said:
While the Court has not attempted to define with exactness the liberty . . . guaranteed [by the Fifth
and Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also
the right of the individual to contract, to engage in any of the common occupations of life, to acquire
useful knowledge, to marry, establish a home and bring up children, to worship God according to
the dictates of his own conscience, and generally to enjoy those privileges long recognized . . . as
essential to the orderly pursuit of happiness by free men. In a Constitution for a free people, there
can be no doubt that the meaning of "liberty" must be broad indeed.67 [Citations omitted]
It cannot be denied that the primary animus behind the ordinance is the curtailment of sexual
behavior. The City asserts before this Court that the subject establishments "have gained notoriety
as venue of prostitution, adultery and fornications in Manila since they provide the necessary
atmosphere for clandestine entry, presence and exit and thus became the ideal haven for
prostitutes and thrill-seekers."68 Whether or not this depiction of a mise-en-scene of vice is
accurate, it cannot be denied that legitimate sexual behavior among willing married or consenting
single adults which is constitutionally protected69 will be curtailed as well, as it was in the City of
Manila case. Our holding therein retains significance for our purposes:
The concept of liberty compels respect for the individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc, borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are
indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations
are built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that his

experience is private, and the will built out of that experience personal to himself. If he surrenders
his will to others, he surrenders himself. If his will is set by the will of others, he ceases to be a
master of himself. I cannot believe that a man no longer a master of himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which
should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy
independently of its identification with liberty; in itself it is fully deserving of constitutional
protection. Governmental powers should stop short of certain intrusions into the personal life of
the citizen.70
We cannot discount other legitimate activities which the Ordinance would proscribe or impair.
There are very legitimate uses for a wash rate or renting the room out for more than twice a day.
Entire families are known to choose pass the time in a motel or hotel whilst the power is
momentarily out in their homes. In transit passengers who wish to wash up and rest between trips
have a legitimate purpose for abbreviated stays in motels or hotels. Indeed any person or groups of
persons in need of comfortable private spaces for a span of a few hours with purposes other than
having sex or using illegal drugs can legitimately look to staying in a motel or hotel as a convenient
alternative.
E.
That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a product and the
petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of
the Ordinance as a police power measure. It must appear that the interests of the public generally,
as distinguished from those of a particular class, require an interference with private rights and the
means must be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive of private rights.71 It must also be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. More importantly, a
reasonable relation must exist between the purposes of the measure and the means employed for
its accomplishment, for even under the guise of protecting the public interest, personal rights and
those pertaining to private property will not be permitted to be arbitrarily invaded.72
Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights. As held in Morfe v. Mutuc, the exercise of police power is subject to
judicial review when life, liberty or property is affected.73 However, this is not in any way meant to
take it away from the vastness of State police power whose exercise enjoys the presumption of
validity.74
Similar to the Comelec resolution requiring newspapers to donate advertising space to candidates,
this Ordinance is a blunt and heavy instrument.75 The Ordinance makes no distinction between
places frequented by patrons engaged in illicit activities and patrons engaged in legitimate actions.
Thus it prevents legitimate use of places where illicit activities are rare or even unheard of. A plain
reading of section 3 of the Ordinance shows it makes no classification of places of lodging, thus
deems them all susceptible to illicit patronage and subject them without exception to the
unjustified prohibition.
The Court has professed its deep sentiment and tenderness of the Ermita-Malate area, its longtime
home,76 and it is skeptical of those who wish to depict our capital city the Pearl of the Orient as a
modern-day Sodom or Gomorrah for the Third World set. Those still steeped in Nick Joaquin-

dreams of the grandeur of Old Manila will have to accept that Manila like all evolving big cities, will
have its problems. Urban decay is a fact of mega cities such as Manila, and vice is a common
problem confronted by the modern metropolis wherever in the world. The solution to such
perceived decay is not to prevent legitimate businesses from offering a legitimate product. Rather,
cities revive themselves by offering incentives for new businesses to sprout up thus attracting the
dynamism of individuals that would bring a new grandeur to Manila.
The behavior which the Ordinance seeks to curtail is in fact already prohibited and could in fact be
diminished simply by applying existing laws. Less intrusive measures such as curbing the
proliferation of prostitutes and drug dealers through active police work would be more effective in
easing the situation. So would the strict enforcement of existing laws and regulations penalizing
prostitution and drug use. These measures would have minimal intrusion on the businesses of the
petitioners and other legitimate merchants. Further, it is apparent that the Ordinance can easily be
circumvented by merely paying the whole day rate without any hindrance to those engaged in illicit
activities. Moreover, drug dealers and prostitutes can in fact collect "wash rates" from their
clientele by charging their customers a portion of the rent for motel rooms and even apartments.
IV.
We reiterate that individual rights may be adversely affected only to the extent that may fairly be
required by the legitimate demands of public interest or public welfare. The State is a leviathan that
must be restrained from needlessly intruding into the lives of its citizens. However well-intentioned
the Ordinance may be, it is in effect an arbitrary and whimsical intrusion into the rights of the
establishments as well as their patrons. The Ordinance needlessly restrains the operation of the
businesses of the petitioners as well as restricting the rights of their patrons without sufficient
justification. The Ordinance rashly equates wash rates and renting out a room more than twice a
day with immorality without accommodating innocuous intentions.
The promotion of public welfare and a sense of morality among citizens deserves the full
endorsement of the judiciary provided that such measures do not trample rights this Court is sworn
to protect.77 The notion that the promotion of public morality is a function of the State is as old as
Aristotle.78 The advancement of moral relativism as a school of philosophy does not de-legitimize
the role of morality in law, even if it may foster wider debate on which particular behavior to
penalize. It is conceivable that a society with relatively little shared morality among its citizens
could be functional so long as the pursuit of sharply variant moral perspectives yields an adequate
accommodation of different interests.79
To be candid about it, the oft-quoted American maxim that "you cannot legislate morality" is
ultimately illegitimate as a matter of law, since as explained by Calabresi, that phrase is more
accurately interpreted as meaning that efforts to legislate morality will fail if they are widely at
variance with public attitudes about right and wrong.80 Our penal laws, for one, are founded on ageold moral traditions, and as long as there are widely accepted distinctions between right and
wrong, they will remain so oriented.
Yet the continuing progression of the human story has seen not only the acceptance of the rightwrong distinction, but also the advent of fundamental liberties as the key to the enjoyment of life to
the fullest. Our democracy is distinguished from non-free societies not with any more extensive
elaboration on our part of what is moral and immoral, but from our recognition that the individual
liberty to make the choices in our lives is innate, and protected by the State. Independent and fair-

minded judges themselves are under a moral duty to uphold the Constitution as the embodiment of
the rule of law, by reason of their expression of consent to do so when they take the oath of office,
and because they are entrusted by the people to uphold the law.81
Even as the implementation of moral norms remains an indispensable complement to governance,
that prerogative is hardly absolute, especially in the face of the norms of due process of liberty. And
while the tension may often be left to the courts to relieve, it is possible for the government to avoid
the constitutional conflict by employing more judicious, less drastic means to promote morality.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is REVERSED, and
the Decision of the Regional Trial Court of Manila, Branch 9, is REINSTATED. Ordinance No. 7774 is
hereby declared UNCONSTITUTIONAL. No pronouncement as to costs.
SO ORDERED.

G.R. No. 183591

October 14, 2008

THE PROVINCE OF NORTH COTABATO, duly represented by GOVERNOR JESUS SACDALAN

and/or VICE-GOVERNOR EMMANUEL PIOL, for and in his own behalf, petitioners,
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE PANEL ON ANCESTRAL
DOMAIN (GRP), represented by SEC. RODOLFO GARCIA, ATTY. LEAH ARMAMENTO, ATTY.
SEDFREY CANDELARIA, MARK RYAN SULLIVAN and/or GEN. HERMOGENES ESPERON, JR., the
latter in his capacity as the present and duly-appointed Presidential Adviser on the Peace
Process (OPAPP) or the so-called Office of the Presidential Adviser on the Peace
Process, respondents.
x--------------------------------------------x
G.R. No. 183752

October 14, 2008

CITY GOVERNMENT OF ZAMBOANGA, as represented by HON. CELSO L. LOBREGAT, City

Mayor of Zamboanga, and in his personal capacity as resident of the City of Zamboanga, Rep.
MA. ISABELLE G. CLIMACO, District 1, and Rep. ERICO BASILIO A. FABIAN, District 2, City of
Zamboanga, petitioners,
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL
(GRP), as represented by RODOLFO C. GARCIA, LEAH ARMAMENTO, SEDFREY CANDELARIA,
MARK RYAN SULLIVAN and HERMOGENES ESPERON, in his capacity as the Presidential
Adviser on Peace Process,respondents.
x--------------------------------------------x
G.R. No. 183893

October 14, 2008

THE CITY OF ILIGAN, duly represented by CITY MAYOR LAWRENCE LLUCH CRUZ, petitioner,
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE PANEL ON ANCESTRAL
DOMAIN (GRP), represented by SEC. RODOLFO GARCIA, ATTY. LEAH ARMAMENTO, ATTY.
SEDFREY CANDELARIA, MARK RYAN SULLIVAN; GEN. HERMOGENES ESPERON, JR., in his
capacity as the present and duly appointed Presidential Adviser on the Peace Process;
and/or SEC. EDUARDO ERMITA, in his capacity as Executive Secretary. respondents.
x--------------------------------------------x
G.R. No. 183951

October 14, 2008

THE PROVINCIAL GOVERNMENT OF ZAMBOANGA DEL NORTE, as represented by HON.

ROLANDO E. YEBES, in his capacity as Provincial Governor, HON. FRANCIS H. OLVIS, in his
capacity as Vice-Governor and Presiding Officer of the Sangguniang Panlalawigan, HON.
CECILIA JALOSJOS CARREON, Congresswoman, 1st Congressional District, HON. CESAR G.
JALOSJOS, Congressman, 3rdCongressional District, and Members of the Sangguniang
Panlalawigan of the Province of Zamboanga del Norte, namely, HON. SETH FREDERICK P.
JALOSJOS, HON. FERNANDO R. CABIGON, JR., HON. ULDARICO M. MEJORADA II, HON. EDIONAR
M. ZAMORAS, HON. EDGAR J. BAGUIO, HON. CEDRIC L. ADRIATICO, HON. FELIXBERTO C.
BOLANDO, HON. JOSEPH BRENDO C. AJERO, HON. NORBIDEIRI B. EDDING, HON. ANECITO S.
DARUNDAY, HON. ANGELICA J. CARREON and HON. LUZVIMINDA E. TORRINO, petitioners,
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL
[GRP], as represented by HON. RODOLFO C. GARCIA and HON. HERMOGENES ESPERON, in his
capacity as the Presidential Adviser of Peace Process, respondents.
x--------------------------------------------x
G.R. No. 183962

October 14, 2008

ERNESTO M. MACEDA, JEJOMAR C. BINAY, and AQUILINO L. PIMENTEL III, petitioners,

vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL,
represented by its Chairman RODOLFO C. GARCIA, and the MORO ISLAMIC LIBERATION
FRONT PEACE NEGOTIATING PANEL, represented by its Chairman MOHAGHER
IQBAL, respondents.
x--------------------------------------------x
FRANKLIN M. DRILON and ADEL ABBAS TAMANO, petitioners-in-intervention.
x--------------------------------------------x
SEN. MANUEL A. ROXAS, petitioners-in-intervention.
x--------------------------------------------x

MUNICIPALITY OF LINAMON duly represented by its Municipal Mayor NOEL N.

DEANO, petitioners-in-intervention,
x--------------------------------------------x
THE CITY OF ISABELA, BASILAN PROVINCE, represented by MAYOR CHERRYLYN P. SANTOSAKBAR,petitioners-in-intervention.
x--------------------------------------------x
THE PROVINCE OF SULTAN KUDARAT, rep. by HON. SUHARTO T. MANGUDADATU, in his
capacity as Provincial Governor and a resident of the Province of Sultan Kudarat, petitionerin-intervention.
x-------------------------------------------x
RUY ELIAS LOPEZ, for and in his own behalf and on behalf of Indigenous Peoples in
Mindanao Not Belonging to the MILF, petitioner-in-intervention.
x--------------------------------------------x
CARLO B. GOMEZ, GERARDO S. DILIG, NESARIO G. AWAT, JOSELITO C. ALISUAG and RICHALEX
G. JAGMIS, as citizens and residents of Palawan, petitioners-in-intervention.
x--------------------------------------------x
MARINO RIDAO and KISIN BUXANI, petitioners-in-intervention.
x--------------------------------------------x
MUSLIM LEGAL ASSISTANCE FOUNDATION, INC (MUSLAF), respondent-in-intervention.
x--------------------------------------------x
MUSLIM MULTI-SECTORAL MOVEMENT FOR PEACE & DEVELOPMENT (MMMPD), respondentin-intervention.
x--------------------------------------------x
DECISION
CARPIO MORALES, J.:
Subject of these consolidated cases is the extent of the powers of the President in pursuing the
peace process. While the facts surrounding this controversy center on the armed conflict in
Mindanao between the government and the Moro Islamic Liberation Front (MILF), the legal issue
involved has a bearing on all areas in the country where there has been a long-standing armed
conflict. Yet again, the Court is tasked to perform a delicate balancing act. It must

uncompromisingly delineate the bounds within which the President may lawfully exercise her
discretion, but it must do so in strict adherence to the Constitution, lest its ruling unduly restricts
the freedom of action vested by that same Constitution in the Chief Executive precisely to enable
her to pursue the peace process effectively.
I. FACTUAL ANTECEDENTS OF THE PETITIONS
On August 5, 2008, the Government of the Republic of the Philippines (GRP) and the MILF, through
the Chairpersons of their respective peace negotiating panels, were scheduled to sign a
Memorandum of Agreement on the Ancestral Domain (MOA-AD) Aspect of the GRP-MILF Tripoli
Agreement on Peace of 2001 in Kuala Lumpur, Malaysia.
The MILF is a rebel group which was established in March 1984 when, under the leadership of the
late Salamat Hashim, it splintered from the Moro National Liberation Front (MNLF) then headed by
Nur Misuari, on the ground, among others, of what Salamat perceived to be the manipulation of the
MNLF away from an Islamic basis towards Marxist-Maoist orientations.1
The signing of the MOA-AD between the GRP and the MILF was not to materialize, however, for
upon motion of petitioners, specifically those who filed their cases before the scheduled signing of
the MOA-AD, this Court issued a Temporary Restraining Order enjoining the GRP from signing the
same.
The MOA-AD was preceded by a long process of negotiation and the concluding of several prior
agreements between the two parties beginning in 1996, when the GRP-MILF peace negotiations
began. On July 18, 1997, the GRP and MILF Peace Panels signed the Agreement on General
Cessation of Hostilities. The following year, they signed the General Framework of Agreement of
Intent on August 27, 1998.
The Solicitor General, who represents respondents, summarizes the MOA-AD by stating that the
same contained, among others, the commitment of the parties to pursue peace negotiations, protect
and respect human rights, negotiate with sincerity in the resolution and pacific settlement of the
conflict, and refrain from the use of threat or force to attain undue advantage while the peace
negotiations on the substantive agenda are on-going.2
Early on, however, it was evident that there was not going to be any smooth sailing in the GRP-MILF
peace process. Towards the end of 1999 up to early 2000, the MILF attacked a number of
municipalities in Central Mindanao and, in March 2000, it took control of the town hall of
Kauswagan, Lanao del Norte.3 In response, then President Joseph Estrada declared and carried out
an "all-out-war" against the MILF.
When President Gloria Macapagal-Arroyo assumed office, the military offensive against the MILF
was suspended and the government sought a resumption of the peace talks. The MILF, according to
a leading MILF member, initially responded with deep reservation, but when President Arroyo
asked the Government of Malaysia through Prime Minister Mahathir Mohammad to help convince
the MILF to return to the negotiating table, the MILF convened its Central Committee to seriously
discuss the matter and, eventually, decided to meet with the GRP.4
The parties met in Kuala Lumpur on March 24, 2001, with the talks being facilitated by the
Malaysian government, the parties signing on the same date the Agreement on the General

Framework for the Resumption of Peace Talks Between the GRP and the MILF. The MILF thereafter
suspended all its military actions.5
Formal peace talks between the parties were held in Tripoli, Libya from June 20-22, 2001, the
outcome of which was the GRP-MILF Tripoli Agreement on Peace (Tripoli Agreement 2001)
containing the basic principles and agenda on the following aspects of the
negotiation: Security Aspect, Rehabilitation Aspect, and Ancestral Domain Aspect. With regard
to the Ancestral Domain Aspect, the parties in Tripoli Agreement 2001 simply agreed "that the
same be discussed further by the Parties in their next meeting."
A second round of peace talks was held in Cyberjaya, Malaysia on August 5-7, 2001 which ended
with the signing of the Implementing Guidelines on the Security Aspect of the Tripoli Agreement
2001 leading to a ceasefire status between the parties. This was followed by the Implementing
Guidelines on the Humanitarian Rehabilitation and Development Aspects of the Tripoli Agreement
2001, which was signed on May 7, 2002 at Putrajaya, Malaysia. Nonetheless, there were many
incidence of violence between government forces and the MILF from 2002 to 2003.
Meanwhile, then MILF Chairman Salamat Hashim passed away on July 13, 2003 and he was
replaced by Al Haj Murad, who was then the chief peace negotiator of the MILF. Murad's position as
chief peace negotiator was taken over by Mohagher Iqbal.6
In 2005, several exploratory talks were held between the parties in Kuala Lumpur, eventually
leading to the crafting of the draft MOA-AD in its final form, which, as mentioned, was set to be
signed last August 5, 2008.
II. STATEMENT OF THE PROCEEDINGS
Before the Court is what is perhaps the most contentious "consensus" ever embodied in an
instrument - the MOA-AD which is assailed principally by the present petitions bearing docket
numbers 183591, 183752, 183893, 183951 and 183962.
Commonly impleaded as respondents are the GRP Peace Panel on Ancestral Domain7 and the
Presidential Adviser on the Peace Process (PAPP) Hermogenes Esperon, Jr.
On July 23, 2008, the Province of North Cotabato8 and Vice-Governor Emmanuel Piol filed a
petition, docketed as G.R. No. 183591, for Mandamus and Prohibition with Prayer for the Issuance
of Writ of Preliminary Injunction and Temporary Restraining Order.9 Invoking the right to
information on matters of public concern, petitioners seek to compel respondents to disclose and
furnish them the complete and official copies of the MOA-AD including its attachments, and to
prohibit the slated signing of the MOA-AD, pending the disclosure of the contents of the MOA-AD
and the holding of a public consultation thereon. Supplementarily, petitioners pray that the MOAAD be declared unconstitutional.10
This initial petition was followed by another one, docketed as G.R. No. 183752, also for Mandamus
and Prohibition11 filed by the City of Zamboanga,12 Mayor Celso Lobregat, Rep. Ma. Isabelle Climaco
and Rep. Erico Basilio Fabian who likewise pray for similar injunctive reliefs. Petitioners herein
moreover pray that the City of Zamboanga be excluded from the Bangsamoro Homeland and/or
Bangsamoro Juridical Entity and, in the alternative, that the MOA-AD be declared null and void.

By Resolution of August 4, 2008, the Court issued a Temporary Restraining Order commanding and
directing public respondents and their agents to cease and desist from formally signing the MOAAD.13 The Court also required the Solicitor General to submit to the Court and petitioners the official
copy of the final draft of the MOA-AD,14 to which she complied.15
Meanwhile, the City of Iligan16 filed a petition for Injunction and/or Declaratory Relief, docketed
as G.R. No. 183893, praying that respondents be enjoined from signing the MOA-AD or, if the same
had already been signed, from implementing the same, and that the MOA-AD be declared
unconstitutional. Petitioners herein additionally implead Executive Secretary Eduardo Ermita as
respondent.
The Province of Zamboanga del Norte,17 Governor Rolando Yebes, Vice-Governor Francis Olvis, Rep.
Cecilia Jalosjos-Carreon, Rep. Cesar Jalosjos, and the members18 of the Sangguniang Panlalawigan of
Zamboanga del Norte filed on August 15, 2008 a petition for Certiorari, Mandamus and
Prohibition,19 docketed as G.R. No. 183951. They pray, inter alia, that the MOA-AD be declared null
and void and without operative effect, and that respondents be enjoined from executing the MOAAD.
On August 19, 2008, Ernesto Maceda, Jejomar Binay, and Aquilino Pimentel III filed a petition for
Prohibition,20docketed as G.R. No. 183962, praying for a judgment prohibiting and permanently
enjoining respondents from formally signing and executing the MOA-AD and or any other
agreement derived therefrom or similar thereto, and nullifying the MOA-AD for being
unconstitutional and illegal. Petitioners herein additionally implead as respondent the MILF Peace
Negotiating Panel represented by its Chairman Mohagher Iqbal.
Various parties moved to intervene and were granted leave of court to file their petitions/comments-in-intervention. Petitioners-in-Intervention include Senator Manuel A. Roxas, former
Senate President Franklin Drilon and Atty. Adel Tamano, the City of Isabela21 and Mayor Cherrylyn
Santos-Akbar, the Province of Sultan Kudarat22 and Gov. Suharto Mangudadatu, the Municipality of
Linamon in Lanao del Norte,23 Ruy Elias Lopez of Davao City and of the Bagobo tribe, Sangguniang
Panlungsod member Marino Ridao and businessman Kisin Buxani, both of Cotabato City; and
lawyers Carlo Gomez, Gerardo Dilig, Nesario Awat, Joselito Alisuag, Richalex Jagmis, all of Palawan
City. The Muslim Legal Assistance Foundation, Inc. (Muslaf) and the Muslim Multi-Sectoral
Movement for Peace and Development (MMMPD) filed their respective Comments-in-Intervention.
By subsequent Resolutions, the Court ordered the consolidation of the petitions. Respondents filed
Comments on the petitions, while some of petitioners submitted their respective Replies.
Respondents, by Manifestation and Motion of August 19, 2008, stated that the Executive
Department shall thoroughly review the MOA-AD and pursue further negotiations to address the
issues hurled against it, and thus moved to dismiss the cases. In the succeeding exchange of
pleadings, respondents' motion was met with vigorous opposition from petitioners.
The cases were heard on oral argument on August 15, 22 and 29, 2008 that tackled the following
principal issues:
1. Whether the petitions have become moot and academic

(i) insofar as the mandamus aspect is concerned, in view of the disclosure of official
copies of the final draft of the Memorandum of Agreement (MOA); and
(ii) insofar as the prohibition aspect involving the Local Government Units is
concerned, if it is considered that consultation has become fait accompli with the
finalization of the draft;
2. Whether the constitutionality and the legality of the MOA is ripe for adjudication;
3. Whether respondent Government of the Republic of the Philippines Peace Panel
committed grave abuse of discretion amounting to lack or excess of jurisdiction when it
negotiated and initiated the MOA vis--vis ISSUES Nos. 4 and 5;
4. Whether there is a violation of the people's right to information on matters of public
concern (1987 Constitution, Article III, Sec. 7) under a state policy of full disclosure of all its
transactions involving public interest (1987 Constitution, Article II, Sec. 28) including public
consultation under Republic Act No. 7160 (LOCAL GOVERNMENT CODE OF 1991)[;]
If it is in the affirmative, whether prohibition under Rule 65 of the 1997 Rules of Civil
Procedure is an appropriate remedy;
5. Whether by signing the MOA, the Government of the Republic of the Philippines would be
BINDING itself
a) to create and recognize the Bangsamoro Juridical Entity (BJE) as a separate state,
or a juridical, territorial or political subdivision not recognized by law;
b) to revise or amend the Constitution and existing laws to conform to the MOA;
c) to concede to or recognize the claim of the Moro Islamic Liberation Front for
ancestral domain in violation of Republic Act No. 8371 (THE INDIGENOUS PEOPLES
RIGHTS ACT OF 1997), particularly Section 3(g) & Chapter VII (DELINEATION,
RECOGNITION OF ANCESTRAL DOMAINS)[;]
If in the affirmative, whether the Executive Branch has the authority to so bind the
Government of the Republic of the Philippines;
6. Whether the inclusion/exclusion of the Province of North Cotabato, Cities of Zamboanga,
Iligan and Isabela, and the Municipality of Linamon, Lanao del Norte in/from the areas
covered by the projected Bangsamoro Homeland is a justiciable question; and
7. Whether desistance from signing the MOA derogates any prior valid commitments of the
Government of the Republic of the Philippines.24
The Court, thereafter, ordered the parties to submit their respective Memoranda. Most of the
parties submitted their memoranda on time.
III. OVERVIEW OF THE MOA-AD

As a necessary backdrop to the consideration of the objections raised in the subject five petitions
and six petitions-in-intervention against the MOA-AD, as well as the two comments-in-intervention
in favor of the MOA-AD, the Court takes an overview of the MOA.
The MOA-AD identifies the Parties to it as the GRP and the MILF.
Under the heading "Terms of Reference" (TOR), the MOA-AD includes not only four earlier
agreements between the GRP and MILF, but also two agreements between the GRP and the MNLF:
the 1976 Tripoli Agreement, and the Final Peace Agreement on the Implementation of the 1976
Tripoli Agreement, signed on September 2, 1996 during the administration of President Fidel
Ramos.
The MOA-AD also identifies as TOR two local statutes - the organic act for the Autonomous Region
in Muslim Mindanao (ARMM)25 and the Indigenous Peoples Rights Act (IPRA),26 and several
international law instruments - the ILO Convention No. 169 Concerning Indigenous and Tribal
Peoples in Independent Countries in relation to the UN Declaration on the Rights of the Indigenous
Peoples, and the UN Charter, among others.
The MOA-AD includes as a final TOR the generic category of "compact rights entrenchment
emanating from the regime of dar-ul-mua'hada (or territory under compact) and dar-ul-sulh (or
territory under peace agreement) that partakes the nature of a treaty device."
During the height of the Muslim Empire, early Muslim jurists tended to see the world through a
simple dichotomy: there was the dar-ul-Islam (the Abode of Islam) and dar-ul-harb (the Abode
of War). The first referred to those lands where Islamic laws held sway, while the second denoted
those lands where Muslims were persecuted or where Muslim laws were outlawed or
ineffective.27 This way of viewing the world, however, became more complex through the centuries
as the Islamic world became part of the international community of nations.
As Muslim States entered into treaties with their neighbors, even with distant States and intergovernmental organizations, the classical division of the world into dar-ul-Islam and dar-ulharb eventually lost its meaning. New terms were drawn up to describe novel ways of perceiving
non-Muslim territories. For instance, areas like dar-ul-mua'hada (land of compact) and dar-ulsulh (land of treaty) referred to countries which, though under a secular regime, maintained
peaceful and cooperative relations with Muslim States, having been bound to each other by treaty
or agreement. Dar-ul-aman (land of order), on the other hand, referred to countries which, though
not bound by treaty with Muslim States, maintained freedom of religion for Muslims.28
It thus appears that the "compact rights entrenchment" emanating from the regime of dar-ulmua'hada and dar-ul-sulh simply refers to all other agreements between the MILF and the
Philippine government - the Philippines being the land of compact and peace agreement - that
partake of the nature of a treaty device, "treaty" being broadly defined as "any solemn agreement in
writing that sets out understandings, obligations, and benefits for both parties which provides for a
framework that elaborates the principles declared in the [MOA-AD]."29
The MOA-AD states that the Parties "HAVE AGREED AND ACKNOWLEDGED AS FOLLOWS," and
starts with its main body.

The main body of the MOA-AD is divided into four strands, namely, Concepts and Principles,
Territory, Resources, and Governance.
A. CONCEPTS AND PRINCIPLES
This strand begins with the statement that it is "the birthright of all Moros and all Indigenous
peoples of Mindanao to identify themselves and be accepted as Bangsamoros.'" It defines
"Bangsamoro people" as the natives or original inhabitants of Mindanao and its adjacent islands
including Palawan and the Sulu archipelago at the time of conquest or colonization, and their
descendants whether mixed or of full blood, including their spouses.30
Thus, the concept of "Bangsamoro," as defined in this strand of the MOA-AD, includes not only
"Moros" as traditionally understood even by Muslims,31 but all indigenous peoples of Mindanao and
its adjacent islands. The MOA-AD adds that the freedom of choice of indigenous peoples shall be
respected. What this freedom of choice consists in has not been specifically defined.
The MOA-AD proceeds to refer to the "Bangsamoro homeland," the ownership of which is vested
exclusively in the Bangsamoro people by virtue of their prior rights of occupation.32 Both parties to
the MOA-AD acknowledge that ancestral domain does not form part of the public domain.33
The Bangsamoro people are acknowledged as having the right to self-governance, which right is
said to be rooted on ancestral territoriality exercised originally under the suzerain authority of
their sultanates and the Pat a Pangampong ku Ranaw. The sultanates were described as states or
"karajaan/kadatuan" resembling a body politic endowed with all the elements of a nation-state in
the modern sense.34
The MOA-AD thus grounds the right to self-governance of the Bangsamoro people on the past
suzerain authority of the sultanates. As gathered, the territory defined as the Bangsamoro
homeland was ruled by several sultanates and, specifically in the case of the Maranao, by the Pat a
Pangampong ku Ranaw, a confederation of independent principalities (pangampong) each ruled by
datus and sultans, none of whom was supreme over the others.35
The MOA-AD goes on to describe the Bangsamoro people as "the First Nation' with defined
territory and with a system of government having entered into treaties of amity and commerce
with foreign nations."
The term "First Nation" is of Canadian origin referring to the indigenous peoples of that territory,
particularly those known as Indians. In Canada, each of these indigenous peoples is equally entitled
to be called "First Nation," hence, all of them are usually described collectively by the plural "First
Nations."36 To that extent, the MOA-AD, by identifying the Bangsamoro people as "the First Nation"
- suggesting its exclusive entitlement to that designation - departs from the Canadian usage of the
term.
The MOA-AD then mentions for the first time the "Bangsamoro Juridical Entity" (BJE) to which it
grants the authority and jurisdiction over the Ancestral Domain and Ancestral Lands of the
Bangsamoro.37
B. TERRITORY

The territory of the Bangsamoro homeland is described as the land mass as well as the maritime,
terrestrial, fluvial and alluvial domains, including the aerial domain and the atmospheric space
above it, embracing the Mindanao-Sulu-Palawan geographic region.38
More specifically, the core of the BJE is defined as the present geographic area of the ARMM - thus
constituting the following areas: Lanao del Sur, Maguindanao, Sulu, Tawi-Tawi, Basilan, and Marawi
City. Significantly, this core also includes certain municipalities of Lanao del Norte that voted for
inclusion in the ARMM in the 2001 plebiscite.39
Outside of this core, the BJE is to cover other provinces, cities, municipalities and barangays, which
are grouped into two categories, Category A and Category B. Each of these areas is to be subjected
to a plebiscite to be held on different dates, years apart from each other. Thus, Category A areas are
to be subjected to a plebiscite not later than twelve (12) months following the signing of the MOAAD.40 Category B areas, also called "Special Intervention Areas," on the other hand, are to be
subjected to a plebiscite twenty-five (25) years from the signing of a separate agreement - the
Comprehensive Compact.41
The Parties to the MOA-AD stipulate that the BJE shall have jurisdiction over all natural resources
within its "internal waters," defined as extending fifteen (15) kilometers from the coastline of the
BJE area;42 that the BJE shall also have "territorial waters," which shall stretch beyond the BJE
internal waters up to the baselines of the Republic of the Philippines (RP) south east and south west
of mainland Mindanao; and that within these territorialwaters, the BJE and the "Central
Government" (used interchangeably with RP) shall exercise joint jurisdiction, authority and
management over all natural resources.43 Notably, the jurisdiction over the internal waters is not
similarly described as "joint."
The MOA-AD further provides for the sharing of minerals on the territorial waters between the
Central Government and the BJE, in favor of the latter, through production sharing and economic
cooperation agreement.44 The activities which the Parties are allowed to conduct on
the territorial waters are enumerated, among which are the exploration and utilization of natural
resources, regulation of shipping and fishing activities, and the enforcement of police and safety
measures.45 There is no similar provision on the sharing of minerals and allowed activities with
respect to the internal waters of the BJE.
C. RESOURCES
The MOA-AD states that the BJE is free to enter into any economic cooperation and trade relations
with foreign countries and shall have the option to establish trade missions in those countries. Such
relationships and understandings, however, are not to include aggression against the GRP. The BJE
may also enter into environmental cooperation agreements.46
The external defense of the BJE is to remain the duty and obligation of the Central Government. The
Central Government is also bound to "take necessary steps to ensure the BJE's participation in
international meetings and events" like those of the ASEAN and the specialized agencies of the UN.
The BJE is to be entitled to participate in Philippine official missions and delegations for the
negotiation of border agreements or protocols for environmental protection and equitable sharing
of incomes and revenues involving the bodies of water adjacent to or between the islands forming
part of the ancestral domain.47

With regard to the right of exploring for, producing, and obtaining all potential sources of energy,
petroleum, fossil fuel, mineral oil and natural gas, the jurisdiction and control thereon is to be
vested in the BJE "as the party having control within its territorial jurisdiction." This right carries
the proviso that, "in times of national emergency, when public interest so requires," the Central
Government may, for a fixed period and under reasonable terms as may be agreed upon by both
Parties, assume or direct the operation of such resources.48
The sharing between the Central Government and the BJE of total production pertaining to natural
resources is to be 75:25 in favor of the BJE.49
The MOA-AD provides that legitimate grievances of the Bangsamoro people arising from any unjust
dispossession of their territorial and proprietary rights, customary land tenures, or their
marginalization shall be acknowledged. Whenever restoration is no longer possible, reparation is to
be in such form as mutually determined by the Parties.50
The BJE may modify or cancel the forest concessions, timber licenses, contracts or agreements,
mining concessions, Mineral Production and Sharing Agreements (MPSA), Industrial Forest
Management Agreements (IFMA), and other land tenure instruments granted by the Philippine
Government, including those issued by the present ARMM.51
D. GOVERNANCE
The MOA-AD binds the Parties to invite a multinational third-party to observe and monitor the
implementation of the Comprehensive Compact. This compact is to embody the "details for the
effective enforcement" and "the mechanisms and modalities for the actual implementation" of the
MOA-AD. The MOA-AD explicitly provides that the participation of the third party shall not in any
way affect the status of the relationship between the Central Government and the BJE.52
The "associative" relationship
between the Central Government
and the BJE
The MOA-AD describes the relationship of the Central Government and the BJE as "associative,"
characterizedby shared authority and responsibility. And it states that the structure of governance
is to be based on executive, legislative, judicial, and administrative institutions with defined powers
and functions in the Comprehensive Compact.
The MOA-AD provides that its provisions requiring "amendments to the existing legal framework"
shall take effect upon signing of the Comprehensive Compact and upon effecting the aforesaid
amendments, with due regard to the non-derogation of prior agreements and within the
stipulated timeframe to be contained in the Comprehensive Compact. As will be discussed later,
much of the present controversy hangs on the legality of this provision.
The BJE is granted the power to build, develop and maintain its own institutions inclusive of civil
service, electoral, financial and banking, education, legislation, legal, economic, police and internal
security force, judicial system and correctional institutions, the details of which shall be discussed
in the negotiation of the comprehensive compact.

As stated early on, the MOA-AD was set to be signed on August 5, 2008 by Rodolfo Garcia and
Mohagher Iqbal, Chairpersons of the Peace Negotiating Panels of the GRP and the MILF,
respectively. Notably, the penultimate paragraph of the MOA-AD identifies the signatories as "the
representatives of the Parties," meaning the GRP and MILF themselves, and not merely of the
negotiating panels.53 In addition, the signature page of the MOA-AD states that it is "WITNESSED
BY" Datuk Othman Bin Abd Razak, Special Adviser to the Prime Minister of Malaysia, "ENDORSED
BY" Ambassador Sayed Elmasry, Adviser to Organization of the Islamic Conference (OIC) Secretary
General and Special Envoy for Peace Process in Southern Philippines, and SIGNED "IN THE
PRESENCE OF" Dr. Albert G. Romulo, Secretary of Foreign Affairs of RP and Dato' Seri Utama Dr.
Rais Bin Yatim, Minister of Foreign Affairs, Malaysia, all of whom were scheduled to sign the
Agreement last August 5, 2008.
Annexed to the MOA-AD are two documents containing the respective lists cum maps of the
provinces, municipalities, and barangays under Categories A and B earlier mentioned in the
discussion on the strand on TERRITORY.
IV. PROCEDURAL ISSUES
A. RIPENESS
The power of judicial review is limited to actual cases or controversies.54 Courts decline to issue
advisory opinions or to resolve hypothetical or feigned problems, or mere academic
questions.55 The limitation of the power of judicial review to actual cases and controversies defines
the role assigned to the judiciary in a tripartite allocation of power, to assure that the courts will not
intrude into areas committed to the other branches of government.56
An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims,
susceptible of judicial resolution as distinguished from a hypothetical or abstract difference or
dispute. There must be a contrariety of legal rights that can be interpreted and enforced on the
basis of existing law and jurisprudence.57The Court can decide the constitutionality of an act or
treaty only when a proper case between opposing parties is submitted for judicial determination.58
Related to the requirement of an actual case or controversy is the requirement of ripeness. A
question is ripe for adjudication when the act being challenged has had a direct adverse effect on
the individual challenging it.59 For a case to be considered ripe for adjudication, it is a prerequisite
that something had then been accomplished or performed by either branch before a court may
come into the picture,60 and the petitioner must allege the existence of an immediate or threatened
injury to itself as a result of the challenged action.61 He must show that he has sustained or is
immediately in danger of sustaining some direct injury as a result of the act complained of.62
The Solicitor General argues that there is no justiciable controversy that is ripe for judicial review
in the present petitions, reasoning that
The unsigned MOA-AD is simply a list of consensus points subject to further negotiations
and legislative enactments as well as constitutional processes aimed at attaining a final
peaceful agreement. Simply put, the MOA-AD remains to be a proposal that does not
automatically create legally demandable rights and obligations until the list of operative
acts required have been duly complied with. x x x

xxxx
In the cases at bar, it is respectfully submitted that this Honorable Court has no authority to
pass upon issues based on hypothetical or feigned constitutional problems or interests
with no concrete bases. Considering the preliminary character of the MOA-AD, there are no
concrete acts that could possibly violate petitioners' and intervenors' rights since the acts
complained of are mere contemplated steps toward the formulation of a final peace
agreement. Plainly, petitioners and intervenors' perceived injury, if at all, is merely
imaginary and illusory apart from being unfounded and based on mere conjectures.
(Underscoring supplied)
The Solicitor General cites63 the following provisions of the MOA-AD:
TERRITORY
xxxx
2. Toward this end, the Parties enter into the following stipulations:
xxxx
d. Without derogating from the requirements of prior agreements, the Government
stipulates to conduct and deliver, using all possible legal measures, within twelve (12)
months following the signing of the MOA-AD, a plebiscite covering the areas as enumerated
in the list and depicted in the map as Category A attached herein (the "Annex"). The Annex
constitutes an integral part of this framework agreement. Toward this end, the Parties shall
endeavor to complete the negotiations and resolve all outstanding issues on the
Comprehensive Compact within fifteen (15) months from the signing of the MOA-AD.
xxxx
GOVERNANCE
xxxx
7. The Parties agree that mechanisms and modalities for the actual implementation of this
MOA-AD shall be spelt out in the Comprehensive Compact to mutually take such steps to
enable it to occur effectively.
Any provisions of the MOA-AD requiring amendments to the existing legal framework shall
come into forceupon the signing of a Comprehensive Compact and upon effecting the
necessary changes to the legal framework with due regard to non-derogation of prior
agreements and within the stipulated timeframe to be contained in the Comprehensive
Compact.64 (Underscoring supplied)
The Solicitor General's arguments fail to persuade.
Concrete acts under the MOA-AD are not necessary to render the present controversy ripe.
In Pimentel, Jr. v. Aguirre,65 this Court held:

x x x [B]y the mere enactment of the questioned law or the approval of the challenged
action, the dispute is said to have ripened into a judicial controversy even without any other
overt act. Indeed, even a singular violation of the Constitution and/or the law is enough to
awaken judicial duty.
xxxx
By the same token, when an act of the President, who in our constitutional scheme is a
coequal of Congress, is seriously alleged to have infringed the Constitution and the laws x x
x settling the dispute becomes the duty and the responsibility of the courts.66
In Santa Fe Independent School District v. Doe,67 the United States Supreme Court held that the
challenge to the constitutionality of the school's policy allowing student-led prayers and speeches
before games was ripe for adjudication, even if no public prayer had yet been led under the policy,
because the policy was being challenged as unconstitutional on its face.68
That the law or act in question is not yet effective does not negate ripeness. For example, in New
York v. United States,69 decided in 1992, the United States Supreme Court held that the action by the
State of New York challenging the provisions of the Low-Level Radioactive Waste Policy Act was
ripe for adjudication even if the questioned provision was not to take effect until January 1, 1996,
because the parties agreed that New York had to take immediate action to avoid the provision's
consequences.70
The present petitions pray for Certiorari,71 Prohibition, and Mandamus. Certiorari and Prohibition
are remedies granted by law when any tribunal, board or officer has acted, in the case of certiorari,
or is proceeding, in the case of prohibition, without or in excess of its jurisdiction or with grave
abuse of discretion amounting to lack or excess of jurisdiction.72 Mandamus is a remedy granted by
law when any tribunal, corporation, board, officer or person unlawfully neglects the performance of
an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use or enjoyment of a right or office to which such other is
entitled.73 Certiorari, Mandamus and Prohibition are appropriate remedies to raise constitutional
issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive
officials.74
The authority of the GRP Negotiating Panel is defined by Executive Order No. 3 (E.O. No. 3), issued
on February 28, 2001.75 The said executive order requires that "[t]he government's policy
framework for peace, including the systematic approach and the administrative structure for
carrying out the comprehensive peace process x x x be governed by this Executive Order."76
The present petitions allege that respondents GRP Panel and PAPP Esperon drafted the terms of the
MOA-AD without consulting the local government units or communities affected, nor informing
them of the proceedings. As will be discussed in greater detail later, such omission, by itself,
constitutes a departure by respondents from their mandate under E.O. No. 3.
Furthermore, the petitions allege that the provisions of the MOA-AD violate the Constitution. The
MOA-AD provides that "any provisions of the MOA-AD requiring amendments to the existing legal
framework shall come into force upon the signing of a Comprehensive Compact and upon effecting
the necessary changes to the legal framework," implying an amendment of the Constitution to
accommodate the MOA-AD. This stipulation, in effect,guaranteed to the MILF the amendment of

the Constitution. Such act constitutes another violation of its authority. Again, these points will be
discussed in more detail later.
As the petitions allege acts or omissions on the part of respondent that exceed their authority, by
violating their duties under E.O. No. 3 and the provisions of the Constitution and statutes, the
petitions make a prima facie case for Certiorari, Prohibition, and Mandamus, and an actual case or
controversy ripe for adjudication exists. When an act of a branch of government is seriously
alleged to have infringed the Constitution, it becomes not only the right but in fact the duty
of the judiciary to settle the dispute.77
B. LOCUS STANDI
For a party to have locus standi, one must allege "such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of issues upon
which the court so largely depends for illumination of difficult constitutional questions."78
Because constitutional cases are often public actions in which the relief sought is likely to affect
other persons, a preliminary question frequently arises as to this interest in the constitutional
question raised.79
When suing as a citizen, the person complaining must allege that he has been or is about to be
denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to
some burdens or penalties by reason of the statute or act complained of.80 When the issue concerns
a public right, it is sufficient that the petitioner is a citizen and has an interest in the execution of the
laws.81
For a taxpayer, one is allowed to sue where there is an assertion that public funds are illegally
disbursed or deflected to an illegal purpose, or that there is a wastage of public funds through the
enforcement of an invalid or unconstitutional law.82 The Court retains discretion whether or not to
allow a taxpayer's suit.83
In the case of a legislator or member of Congress, an act of the Executive that injures the institution
of Congress causes a derivative but nonetheless substantial injury that can be questioned by
legislators. A member of the House of Representatives has standing to maintain inviolate the
prerogatives, powers and privileges vested by the Constitution in his office.84
An organization may be granted standing to assert the rights of its members,85 but the mere
invocation by theIntegrated Bar of the Philippines or any member of the legal profession of the duty
to preserve the rule of law does not suffice to clothe it with standing.86
As regards a local government unit (LGU), it can seek relief in order to protect or vindicate an
interest of its own, and of the other LGUs.87
Intervenors, meanwhile, may be given legal standing upon showing of facts that satisfy the
requirements of the law authorizing intervention,88 such as a legal interest in the matter in
litigation, or in the success of either of the parties.
In any case, the Court has discretion to relax the procedural technicality on locus standi, given the
liberal attitude it has exercised, highlighted in the case of David v. Macapagal-Arroyo,89 where

technicalities of procedure were brushed aside, the constitutional issues raised being of paramount
public interest or of transcendental importance deserving the attention of the Court in view of their
seriousness, novelty and weight as precedents.90 The Court's forbearing stance on locus standi on
issues involving constitutional issues has for its purpose the protection of fundamental rights.
In not a few cases, the Court, in keeping with its duty under the Constitution to determine whether
the other branches of government have kept themselves within the limits of the Constitution and
the laws and have not abused the discretion given them, has brushed aside technical rules of
procedure.91
In the petitions at bar, petitioners Province of North Cotabato (G.R. No. 183591) Province of
Zamboanga del Norte (G.R. No. 183951), City of Iligan (G.R. No. 183893) and City of
Zamboanga (G.R. No. 183752) and petitioners-in-intervention Province of Sultan Kudarat, City
of Isabela and Municipality of Linamon havelocus standi in view of the direct and substantial
injury that they, as LGUs, would suffer as their territories, whether in whole or in part, are to be
included in the intended domain of the BJE. These petitioners allege that they did not vote for their
inclusion in the ARMM which would be expanded to form the BJE territory. Petitioners' legal
standing is thus beyond doubt.
In G.R. No. 183962, petitioners Ernesto Maceda, Jejomar Binay and Aquilino Pimentel III would
have no standing as citizens and taxpayers for their failure to specify that they would be denied
some right or privilege or there would be wastage of public funds. The fact that they are a former
Senator, an incumbent mayor of Makati City, and a resident of Cagayan de Oro, respectively, is of no
consequence. Considering their invocation of the transcendental importance of the issues at hand,
however, the Court grants them standing.
Intervenors Franklin Drilon and Adel Tamano, in alleging their standing as taxpayers, assert that
government funds would be expended for the conduct of an illegal and unconstitutional plebiscite
to delineate the BJE territory. On that score alone, they can be given legal standing. Their allegation
that the issues involved in these petitions are of "undeniable transcendental importance" clothes
them with added basis for their personality to intervene in these petitions.
With regard to Senator Manuel Roxas, his standing is premised on his being a member of the
Senate and a citizen to enforce compliance by respondents of the public's constitutional right to be
informed of the MOA-AD, as well as on a genuine legal interest in the matter in litigation, or in the
success or failure of either of the parties. He thus possesses the requisite standing as an intervenor.
With respect to Intervenors Ruy Elias Lopez, as a former congressman of the 3rd district of Davao
City, a taxpayer and a member of the Bagobo tribe; Carlo B. Gomez, et al., as members of the IBP
Palawan chapter, citizens and taxpayers; Marino Ridao, as taxpayer, resident and member of
the Sangguniang Panlungsod of Cotabato City; and Kisin Buxani, as taxpayer, they failed to allege
any proper legal interest in the present petitions. Just the same, the Court exercises its discretion to
relax the procedural technicality on locus standigiven the paramount public interest in the issues at
hand.
Intervening respondents Muslim Multi-Sectoral Movement for Peace and Development, an
advocacy group for justice and the attainment of peace and prosperity in Muslim Mindanao;
and Muslim Legal Assistance Foundation Inc., a non-government organization of Muslim
lawyers, allege that they stand to be benefited or prejudiced, as the case may be, in the resolution of

the petitions concerning the MOA-AD, and prays for the denial of the petitions on the grounds
therein stated. Such legal interest suffices to clothe them with standing.
B. MOOTNESS
Respondents insist that the present petitions have been rendered moot with the satisfaction of all
the reliefs prayed for by petitioners and the subsequent pronouncement of the Executive Secretary
that "[n]o matter what the Supreme Court ultimately decides[,] the government will not sign the
MOA."92
In lending credence to this policy decision, the Solicitor General points out that the President had
already disbanded the GRP Peace Panel.93
In David v. Macapagal-Arroyo,94 this Court held that the "moot and academic" principle not being a
magical formula that automatically dissuades courts in resolving a case, it will decide cases,
otherwise moot and academic, if it finds that (a) there is a grave violation of the Constitution;95 (b)
the situation is of exceptional character and paramount public interest is involved;96 (c) the
constitutional issue raised requires formulation of controlling principles to guide the bench, the
bar, and the public;97 and (d) the case is capable of repetition yet evading review.98
Another exclusionary circumstance that may be considered is where there is
a voluntary cessation of the activity complained of by the defendant or doer. Thus, once a suit is
filed and the doer voluntarily ceases the challenged conduct, it does not automatically deprive the
tribunal of power to hear and determine the case and does not render the case moot especially
when the plaintiff seeks damages or prays for injunctive relief against the possible recurrence of the
violation.99
The present petitions fall squarely into these exceptions to thus thrust them into the domain of
judicial review. The grounds cited above in David are just as applicable in the present cases as they
were, not only in David, but also in Province of Batangas v. Romulo100 and Manalo v.
Calderon101 where the Court similarly decided them on the merits, supervening events that would
ordinarily have rendered the same moot notwithstanding.
Petitions not mooted
Contrary then to the asseverations of respondents, the non-signing of the MOA-AD and the eventual
dissolution of the GRP Peace Panel did not moot the present petitions. It bears emphasis that the
signing of the MOA-AD did not push through due to the Court's issuance of a Temporary Restraining
Order.
Contrary too to respondents' position, the MOA-AD cannot be considered a mere "list of consensus
points," especially given its nomenclature, the need to have it signed or initialed by all the
parties concerned on August 5, 2008, and the far-reaching Constitutional implications of these
"consensus points," foremost of which is the creation of the BJE.
In fact, as what will, in the main, be discussed, there is a commitment on the part of respondents
to amend and effect necessary changes to the existing legal framework for certain provisions
of the MOA-AD to take effect. Consequently, the present petitions are not confined to the terms
and provisions of the MOA-AD, but to other on-going and future negotiations and agreements

necessary for its realization. The petitions have not, therefore, been rendered moot and academic
simply by the public disclosure of the MOA-AD,102 the manifestation that it will not be signed as well
as the disbanding of the GRP Panel not withstanding.
Petitions are imbued with paramount public interest
There is no gainsaying that the petitions are imbued with paramount public interest, involving a
significant part of the country's territory and the wide-ranging political modifications of affected
LGUs. The assertion that the MOA-AD is subject to further legal enactments including possible
Constitutional amendments more than ever provides impetus for the Court to formulate
controlling principles to guide the bench, the bar, the public and, in this case, the
government and its negotiating entity.
Respondents cite Suplico v. NEDA, et al.103 where the Court did not "pontificat[e] on issues which no
longer legitimately constitute an actual case or controversy [as this] will do more harm than good
to the nation as a whole."
The present petitions must be differentiated from Suplico. Primarily, in Suplico, what was assailed
and eventually cancelled was a stand-alone government procurement contract for a national
broadband network involving a one-time contractual relation between two parties-the government
and a private foreign corporation. As the issues therein involved specific government procurement
policies and standard principles on contracts, the majority opinion in Suplico found nothing
exceptional therein, the factual circumstances being peculiar only to the transactions and parties
involved in the controversy.
The MOA-AD is part of a series of agreements
In the present controversy, the MOA-AD is a significant part of a series of agreements necessary
to carry out the Tripoli Agreement 2001. The MOA-AD which dwells on the Ancestral Domain
Aspect of said Tripoli Agreement is the third such component to be undertaken following the
implementation of the Security Aspect in August 2001 and the Humanitarian, Rehabilitation and
Development Aspect in May 2002.
Accordingly, even if the Executive Secretary, in his Memorandum of August 28, 2008 to the Solicitor
General, has stated that "no matter what the Supreme Court ultimately decides[,] the government
will not sign the MOA[-AD],"mootness will not set in in light of the terms of the Tripoli Agreement
2001.
Need to formulate principles-guidelines
Surely, the present MOA-AD can be renegotiated or another one will be drawn up to carry out the
Ancestral Domain Aspect of the Tripoli Agreement 2001, in another or in any form, which could
contain similar or significantly drastic provisions. While the Court notes the word of the Executive
Secretary that the government "is committed to securing an agreement that is both constitutional
and equitable because that is the only way that long-lasting peace can be assured," it is minded to
render a decision on the merits in the present petitions toformulate controlling principles to
guide the bench, the bar, the public and, most especially, the government in negotiating with
the MILF regarding Ancestral Domain.

Respondents invite the Court's attention to the separate opinion of then Chief Justice Artemio
Panganiban inSanlakas v. Reyes104 in which he stated that the doctrine of "capable of repetition yet
evading review" can override mootness, "provided the party raising it in a proper case has been
and/or continue to be prejudiced or damaged as a direct result of their issuance." They contend that
the Court must have jurisdiction over the subject matter for the doctrine to be invoked.
The present petitions all contain prayers for Prohibition over which this Court exercises original
jurisdiction. While G.R. No. 183893 (City of Iligan v. GRP) is a petition for Injunction and
Declaratory Relief, the Court will treat it as one for Prohibition as it has far reaching implications
and raises questions that need to be resolved.105 At all events, the Court has jurisdiction over most if
not the rest of the petitions.
Indeed, the present petitions afford a proper venue for the Court to again apply the doctrine
immediately referred to as what it had done in a number of landmark cases.106 There is
a reasonable expectation that petitioners, particularly the Provinces of North Cotabato, Zamboanga
del Norte and Sultan Kudarat, the Cities of Zamboanga, Iligan and Isabela, and the Municipality of
Linamon, will again be subjected to the same problem in the future as respondents' actions are
capable of repetition, in another or any form.
It is with respect to the prayers for Mandamus that the petitions have become moot, respondents
having, by Compliance of August 7, 2008, provided this Court and petitioners with official copies of
the final draft of the MOA-AD and its annexes. Too, intervenors have been furnished, or have
procured for themselves, copies of the MOA-AD.
V. SUBSTANTIVE ISSUES
As culled from the Petitions and Petitions-in-Intervention, there are basically two SUBSTANTIVE
issues to be resolved, one relating to the manner in which the MOA-AD was negotiated and
finalized, the other relating to its provisions, viz:
1. Did respondents violate constitutional and statutory provisions on public consultation and the
right to information when they negotiated and later initialed the MOA-AD?
2. Do the contents of the MOA-AD violate the Constitution and the laws?
ON THE FIRST SUBSTANTIVE ISSUE
Petitioners invoke their constitutional right to information on matters of public concern, as
provided in Section 7, Article III on the Bill of Rights:
Sec. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to official
acts, transactions, or decisions, as well as to government research data used as basis for
policy development, shall be afforded the citizen, subject to such limitations as may be
provided by law.107
As early as 1948, in Subido v. Ozaeta,108 the Court has recognized the statutory right to examine and
inspect public records, a right which was eventually accorded constitutional status.

The right of access to public documents, as enshrined in both the 1973 Constitution and the 1987
Constitution, has been recognized as a self-executory constitutional right.109
In the 1976 case of Baldoza v. Hon. Judge Dimaano,110 the Court ruled that access to public records is
predicated on the right of the people to acquire information on matters of public concern since,
undoubtedly, in a democracy, the pubic has a legitimate interest in matters of social and political
significance.
x x x The incorporation of this right in the Constitution is a recognition of the fundamental role of
free exchange of information in a democracy. There can be no realistic perception by the public of
the nation's problems, nor a meaningful democratic decision-making if they are denied access to
information of general interest. Information is needed to enable the members of society to cope
with the exigencies of the times. As has been aptly observed: "Maintaining the flow of such
information depends on protection for both its acquisition and its dissemination since, if either
process is interrupted, the flow inevitably ceases." x x x111
In the same way that free discussion enables members of society to cope with the exigencies of their
time, access to information of general interest aids the people in democratic decision-making by giving
them a better perspective of the vital issues confronting the nation112 so that they may be able to
criticize and participate in the affairs of the government in a responsible, reasonable and effective
manner. It is by ensuring an unfettered and uninhibited exchange of ideas among a well-informed
public that a government remains responsive to the changes desired by the people.113
The MOA-AD is a matter of public concern
That the subject of the information sought in the present cases is a matter of public concern114 faces
no serious challenge. In fact, respondents admit that the MOA-AD is indeed of public concern.115 In
previous cases, the Court found that the regularity of real estate transactions entered in the
Register of Deeds,116 the need for adequate notice to the public of the various laws,117 the civil
service eligibility of a public employee,118 the proper management of GSIS funds allegedly used to
grant loans to public officials,119 the recovery of the Marcoses' alleged ill-gotten wealth,120 and the
identity of party-list nominees,121 among others, are matters of public concern. Undoubtedly, the
MOA-AD subject of the present cases is of public concern, involving as it does the sovereignty and
territorial integrity of the State, which directly affects the lives of the public at large.
Matters of public concern covered by the right to information include steps and negotiations
leading to the consummation of the contract. In not distinguishing as to the executory nature or
commercial character of agreements, the Court has categorically ruled:
x x x [T]he right to information "contemplates inclusion of negotiations leading to the
consummation of the transaction." Certainly, a consummated contract is not a
requirement for the exercise of the right to information. Otherwise, the people can never
exercise the right if no contract is consummated, and if one is consummated, it may be too
late for the public to expose its defects.
Requiring a consummated contract will keep the public in the dark until the contract, which
may be grossly disadvantageous to the government or even illegal, becomes fait accompli.
This negates the State policy of full transparency on matters of public concern, a situation
which the framers of the Constitution could not have intended. Such a requirement will

prevent the citizenry from participating in the public discussion of any proposed contract,
effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an
emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full
disclosure of all its transactions involving public interest."122 (Emphasis and italics in the
original)
Intended as a "splendid symmetry"123 to the right to information under the Bill of Rights is the policy
of public disclosure under Section 28, Article II of the Constitution reading:
Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest.124
The policy of full public disclosure enunciated in above-quoted Section 28 complements the right of
access to information on matters of public concern found in the Bill of Rights. The right to
information guarantees the right of the people to demand information, while Section 28 recognizes
the duty of officialdom to give information even if nobody demands.125
The policy of public disclosure establishes a concrete ethical principle for the conduct of public
affairs in a genuinely open democracy, with the people's right to know as the centerpiece. It is a
mandate of the State to be accountable by following such policy.126 These provisions are vital to the
exercise of the freedom of expression and essential to hold public officials at all times accountable
to the people.127
Whether Section 28 is self-executory, the records of the deliberations of the Constitutional
Commission so disclose:
MR. SUAREZ. And since this is not self-executory, this policy will not be enunciated or will
not be in force and effect until after Congress shall have provided it.
MR. OPLE. I expect it to influence the climate of public ethics immediately but, of course, the
implementing law will have to be enacted by Congress, Mr. Presiding Officer.128
The following discourse, after Commissioner Hilario Davide, Jr., sought clarification on the issue, is
enlightening.
MR. DAVIDE. I would like to get some clarifications on this. Mr. Presiding Officer, did I get
the Gentleman correctly as having said that this is not a self-executing provision? It would
require a legislation by Congress to implement?
MR. OPLE. Yes. Originally, it was going to be self-executing, but I accepted an amendment
from Commissioner Regalado, so that the safeguards on national interest are modified by
the clause "as may be provided by law"
MR. DAVIDE. But as worded, does it not mean that this will immediately take effect and
Congress may provide for reasonable safeguards on the sole ground national interest?
MR. OPLE. Yes. I think so, Mr. Presiding Officer, I said earlier that it should
immediately influence the climate of the conduct of public affairs but, of course,

Congress here may no longer pass a law revoking it, or if this is approved, revoking this
principle, which is inconsistent with this policy.129 (Emphasis supplied)
Indubitably, the effectivity of the policy of public disclosure need not await the passing of a
statute. As Congress cannot revoke this principle, it is merely directed to provide for "reasonable
safeguards." The complete and effective exercise of the right to information necessitates that its
complementary provision on public disclosure derive the same self-executory nature. Since both
provisions go hand-in-hand, it is absurd to say that the broader130 right to information on matters
of public concern is already enforceable while the correlative duty of the State to disclose its
transactions involving public interest is not enforceable until there is an enabling law.Respondents
cannot thus point to the absence of an implementing legislation as an excuse in not effecting such
policy.
An essential element of these freedoms is to keep open a continuing dialogue or process of
communication between the government and the people. It is in the interest of the State that the
channels for free political discussion be maintained to the end that the government may perceive
and be responsive to the people's will.131Envisioned to be corollary to the twin rights to information
and disclosure is the design for feedback mechanisms.
MS. ROSARIO BRAID. Yes. And lastly, Mr. Presiding Officer, will the people be able to
participate? Will the government provide feedback mechanisms so that the people
can participate and can react where the existing media facilities are not able to
provide full feedback mechanisms to the government? I suppose this will be part of
the government implementing operational mechanisms.
MR. OPLE. Yes. I think through their elected representatives and that is how these courses
take place. There is a message and a feedback, both ways.
xxxx
MS. ROSARIO BRAID. Mr. Presiding Officer, may I just make one last sentence?
I think when we talk about the feedback network, we are not talking about public
officials but also network of private business o[r] community-based organizations
that will be reacting. As a matter of fact, we will put more credence or credibility on the
private network of volunteers and voluntary community-based organizations. So I do not
think we are afraid that there will be another OMA in the making.132(Emphasis supplied)
The imperative of a public consultation, as a species of the right to information, is evident in the
"marching orders" to respondents. The mechanics for the duty to disclose information and to
conduct public consultation regarding the peace agenda and process is manifestly provided by E.O.
No. 3.133 The preambulatory clause of E.O. No. 3 declares that there is a need to further enhance the
contribution of civil society to the comprehensive peace process by institutionalizing the people's
participation.
One of the three underlying principles of the comprehensive peace process is that it "should be
community-based, reflecting the sentiments, values and principles important to all Filipinos" and
"shall be defined not by the government alone, nor by the different contending groups only, but by
all Filipinos as one community."134Included as a component of the comprehensive peace process is

consensus-building and empowerment for peace, which includes "continuing consultations on both
national and local levels to build consensus for a peace agenda and process, and the mobilization
and facilitation of people's participation in the peace process."135
Clearly, E.O. No. 3 contemplates not just the conduct of a plebiscite to effectuate "continuing"
consultations, contrary to respondents' position that plebiscite is "more than sufficient
consultation."136
Further, E.O. No. 3 enumerates the functions and responsibilities of the PAPP, one of which is to
"[c]onductregular dialogues with the National Peace Forum (NPF) and other peace partners to seek
relevant information, comments, recommendations as well as to render appropriate and timely
reports on the progress of the comprehensive peace process."137 E.O. No. 3 mandates the
establishment of the NPF to be "the principal forumfor the PAPP to consult with and seek advi[c]e
from the peace advocates, peace partners and concerned sectors of society on both national and
local levels, on the implementation of the comprehensive peace process, as well as for government[]civil society dialogue and consensus-building on peace agenda and initiatives."138
In fine, E.O. No. 3 establishes petitioners' right to be consulted on the peace agenda, as a
corollary to the constitutional right to information and disclosure.
PAPP Esperon committed grave abuse of discretion
The PAPP committed grave abuse of discretion when he failed to carry out the pertinent
consultation. The furtive process by which the MOA-AD was designed and crafted runs contrary to
and in excess of the legal authority, and amounts to a whimsical, capricious, oppressive, arbitrary
and despotic exercise thereof.
The Court may not, of course, require the PAPP to conduct the consultation in a particular way or
manner. It may, however, require him to comply with the law and discharge the functions within the
authority granted by the President.139
Petitioners are not claiming a seat at the negotiating table, contrary to respondents' retort in
justifying the denial of petitioners' right to be consulted. Respondents' stance manifests the manner
by which they treat the salient provisions of E.O. No. 3 on people's participation. Such disregard of
the express mandate of the President is not much different from superficial conduct toward token
provisos that border on classic lip service.140 It illustrates a gross evasion of positive duty and a
virtual refusal to perform the duty enjoined.
As for respondents' invocation of the doctrine of executive privilege, it is not tenable under the
premises. The argument defies sound reason when contrasted with E.O. No. 3's explicit provisions
on continuing consultation and dialogue on both national and local levels. The executive order
even recognizes the exercise of the public's right even before the GRP makes its official
recommendations or before the government proffers its definite propositions.141 It bear emphasis
that E.O. No. 3 seeks to elicit relevant advice, information, comments and recommendations from
the people through dialogue.
AT ALL EVENTS, respondents effectively waived the defense of executive privilege in view of their
unqualified disclosure of the official copies of the final draft of the MOA-AD. By unconditionally
complying with the Court's August 4, 2008 Resolution, without a prayer for the document's

disclosure in camera, or without a manifestation that it was complying therewith ex abundante ad

cautelam.
Petitioners' assertion that the Local Government Code (LGC) of 1991 declares it a State policy to
"require all national agencies and offices to conduct periodic consultations with appropriate local
government units, non-governmental and people's organizations, and other concerned sectors of
the community before any project or program is implemented in their respective jurisdictions"142 is
well-taken. The LGC chapter on intergovernmental relations puts flesh into this avowed policy:
Prior Consultations Required. - No project or program shall be implemented by government
authoritiesunless the consultations mentioned in Sections 2 (c) and 26 hereof are complied
with, and prior approval of the sanggunian concerned is obtained: Provided, That occupants
in areas where such projects are to be implemented shall not be evicted unless appropriate
relocation sites have been provided, in accordance with the provisions of the
Constitution.143 (Italics and underscoring supplied)
In Lina, Jr. v. Hon. Pao,144 the Court held that the above-stated policy and above-quoted provision
of the LGU apply only to national programs or projects which are to be implemented in a particular
local community. Among the programs and projects covered are those that are critical to the
environment and human ecology including those that may call for the eviction of a particular group
of people residing in the locality where these will be implemented.145 The MOA-AD is one peculiar
program that unequivocally and unilaterally vests ownership of a vast territory to the
Bangsamoro people,146 which could pervasively and drastically result to the diaspora or
displacement of a great number of inhabitants from their total environment.
With respect to the indigenous cultural communities/indigenous peoples (ICCs/IPs), whose
interests are represented herein by petitioner Lopez and are adversely affected by the MOA-AD, the
ICCs/IPs have, under the IPRA, the right to participate fully at all levels of decision-making in
matters which may affect their rights, lives and destinies.147 The MOA-AD, an instrument
recognizing ancestral domain, failed to justify its non-compliance with the clear-cut mechanisms
ordained in said Act,148 which entails, among other things, the observance of the free and prior
informed consent of the ICCs/IPs.
Notably, the IPRA does not grant the Executive Department or any government agency the power
to delineate and recognize an ancestral domain claim by mere agreement or compromise. The
recognition of the ancestral domain is the raison d'etre of the MOA-AD, without which all other
stipulations or "consensus points" necessarily must fail. In proceeding to make a sweeping
declaration on ancestral domain, without complying with the IPRA, which is cited as one of the TOR
of the MOA-AD, respondents clearly transcended the boundaries of their authority. As it
seems, even the heart of the MOA-AD is still subject to necessary changes to the legal framework.
While paragraph 7 on Governance suspends the effectivity of all provisions requiring changes to the
legal framework, such clause is itself invalid, as will be discussed in the following section.
Indeed, ours is an open society, with all the acts of the government subject to public scrutiny and
available always to public cognizance. This has to be so if the country is to remain democratic, with
sovereignty residing in the people and all government authority emanating from them.149
ON THE SECOND SUBSTANTIVE ISSUE

With regard to the provisions of the MOA-AD, there can be no question that they cannot all be
accommodated under the present Constitution and laws. Respondents have admitted as much in
the oral arguments before this Court, and the MOA-AD itself recognizes the need to amend the
existing legal framework to render effective at least some of its provisions. Respondents,
nonetheless, counter that the MOA-AD is free of any legal infirmity because any provisions therein
which are inconsistent with the present legal framework will not be effective until the necessary
changes to that framework are made. The validity of this argument will be considered later. For
now, the Court shall pass upon how
The MOA-AD is inconsistent with the Constitution and laws as presently worded.
In general, the objections against the MOA-AD center on the extent of the powers conceded therein
to the BJE. Petitioners assert that the powers granted to the BJE exceed those granted to any local
government under present laws, and even go beyond those of the present ARMM. Before assessing
some of the specific powers that would have been vested in the BJE, however, it would be useful to
turn first to a general idea that serves as a unifying link to the different provisions of the MOA-AD,
namely, the international law concept of association. Significantly, the MOA-AD explicitly alludes to
this concept, indicating that the Parties actually framed its provisions with it in mind.
Association is referred to in paragraph 3 on TERRITORY, paragraph 11 on RESOURCES, and
paragraph 4 on GOVERNANCE. It is in the last mentioned provision, however, that the MOA-AD
most clearly uses it to describe the envisioned relationship between the BJE and the Central
Government.
4. The relationship between the Central Government and the Bangsamoro juridical
entity shall beassociative characterized by shared authority and responsibility with a
structure of governance based on executive, legislative, judicial and administrative
institutions with defined powers and functions in the comprehensive compact. A period of
transition shall be established in a comprehensive peace compact specifying the
relationship between the Central Government and the BJE. (Emphasis and underscoring
supplied)
The nature of the "associative" relationship may have been intended to be defined more precisely
in the still to be forged Comprehensive Compact. Nonetheless, given that there is a concept of
"association" in international law, and the MOA-AD - by its inclusion of international law
instruments in its TOR- placed itself in an international legal context, that concept of association
may be brought to bear in understanding the use of the term "associative" in the MOA-AD.
Keitner and Reisman state that
[a]n association is formed when two states of unequal power voluntarily establish durable
links. In the basic model, one state, the associate, delegates certain responsibilities to
the other, the principal, while maintaining its international status as a state. Free
associations represent a middle ground between integration and independence. x x
x150 (Emphasis and underscoring supplied)
For purposes of illustration, the Republic of the Marshall Islands and the Federated States of
Micronesia (FSM), formerly part of the U.S.-administered Trust Territory of the Pacific
Islands,151 are associated states of the U.S. pursuant to a Compact of Free Association. The currency

in these countries is the U.S. dollar, indicating their very close ties with the U.S., yet they issue their
own travel documents, which is a mark of their statehood. Their international legal status as states
was confirmed by the UN Security Council and by their admission to UN membership.
According to their compacts of free association, the Marshall Islands and the FSM generally have the
capacity to conduct foreign affairs in their own name and right, such capacity extending to matters
such as the law of the sea, marine resources, trade, banking, postal, civil aviation, and cultural
relations. The U.S. government, when conducting its foreign affairs, is obligated to consult with the
governments of the Marshall Islands or the FSM on matters which it (U.S. government) regards as
relating to or affecting either government.
In the event of attacks or threats against the Marshall Islands or the FSM, the U.S. government has
the authority and obligation to defend them as if they were part of U.S. territory. The U.S.
government, moreover, has the option of establishing and using military areas and facilities within
these associated states and has the right to bar the military personnel of any third country from
having access to these territories for military purposes.
It bears noting that in U.S. constitutional and international practice, free association is understood
as an international association between sovereigns. The Compact of Free Association is a treaty
which is subordinate to the associated nation's national constitution, and each party may terminate
the association consistent with the right of independence. It has been said that, with the admission
of the U.S.-associated states to the UN in 1990, the UN recognized that the American model of free
association is actually based on an underlying status of independence.152
In international practice, the "associated state" arrangement has usually been used as
a transitional device of former colonies on their way to full independence. Examples of states that
have passed through the status of associated states as a transitional phase are Antigua, St. KittsNevis-Anguilla, Dominica, St. Lucia, St. Vincent and Grenada. All have since become independent
states.153
Back to the MOA-AD, it contains many provisions which are consistent with the international legal
concept ofassociation, specifically the following: the BJE's capacity to enter into economic and trade
relations with foreign countries, the commitment of the Central Government to ensure the BJE's
participation in meetings and events in the ASEAN and the specialized UN agencies, and the
continuing responsibility of the Central Government over external defense. Moreover, the BJE's
right to participate in Philippine official missions bearing on negotiation of border agreements,
environmental protection, and sharing of revenues pertaining to the bodies of water adjacent to or
between the islands forming part of the ancestral domain, resembles the right of the governments
of FSM and the Marshall Islands to be consulted by the U.S. government on any foreign affairs
matter affecting them.
These provisions of the MOA indicate, among other things, that the Parties aimed to vest in the
BJE the status of an associated state or, at any rate, a status closely approximating it.
The concept of association is not recognized under the present Constitution
No province, city, or municipality, not even the ARMM, is recognized under our laws as having an
"associative" relationship with the national government. Indeed, the concept implies powers that go
beyond anything ever granted by the Constitution to any local or regional government. It also

implies the recognition of the associated entity as a state. The Constitution, however, does not
contemplate any state in this jurisdiction other than the Philippine State, much less does it provide
for a transitory status that aims to prepare any part of Philippine territory for independence.
Even the mere concept animating many of the MOA-AD's provisions, therefore, already requires for
its validity the amendment of constitutional provisions, specifically the following provisions of
Article X:
SECTION 1. The territorial and political subdivisions of the Republic of the Philippines are
the provinces, cities, municipalities, and barangays. There shall be autonomous
regions in Muslim Mindanao and the Cordilleras as hereinafter provided.
SECTION 15. There shall be created autonomous regions in Muslim Mindanao and in the
Cordilleras consisting of provinces, cities, municipalities, and geographical areas sharing
common and distinctive historical and cultural heritage, economic and social structures, and
other relevant characteristics within the framework of this Constitution and the
national sovereignty as well as territorial integrity of the Republic of the Philippines.
The BJE is a far more powerful
entity than the autonomous region
recognized in the Constitution
It is not merely an expanded version of the ARMM, the status of its relationship with the national
government being fundamentally different from that of the ARMM. Indeed, BJE is a state in all but
name as it meets the criteria of a state laid down in the Montevideo Convention,154 namely,
a permanent population, a defined territory, a government, and a capacity to enter into relations
with other states.
Even assuming arguendo that the MOA-AD would not necessarily sever any portion of Philippine
territory, the spirit animating it - which has betrayed itself by its use of the concept of association
- runs counter to the national sovereignty and territorial integrity of the Republic.
The defining concept underlying the relationship between the national government and the
BJE being itself contrary to the present Constitution, it is not surprising that many of the
specific provisions of the MOA-AD on the formation and powers of the BJE are in conflict with
the Constitution and the laws.
Article X, Section 18 of the Constitution provides that "[t]he creation of the autonomous region shall
be effective when approved by a majority of the votes cast by the constituent units in a plebiscite
called for the purpose, provided that only provinces, cities, and geographic areas voting
favorably in such plebiscite shall be included in the autonomous region." (Emphasis supplied)
As reflected above, the BJE is more of a state than an autonomous region. But even assuming that it
is covered by the term "autonomous region" in the constitutional provision just quoted, the MOAAD would still be in conflict with it. Under paragraph 2(c) on TERRITORY in relation to 2(d) and
2(e), the present geographic area of the ARMM and, in addition, the municipalities of Lanao del
Norte which voted for inclusion in the ARMM during the 2001 plebiscite - Baloi, Munai, Nunungan,
Pantar, Tagoloan and Tangkal - are automatically part of the BJE without need of another plebiscite,
in contrast to the areas under Categories A and B mentioned earlier in the overview. That the

present components of the ARMM and the above-mentioned municipalities voted for inclusion
therein in 2001, however, does not render another plebiscite unnecessary under the Constitution,
precisely because what these areas voted for then was their inclusion in the ARMM, not the BJE.
The MOA-AD, moreover, would not
comply with Article X, Section 20 of
the Constitution
since that provision defines the powers of autonomous regions as follows:
SECTION 20. Within its territorial jurisdiction and subject to the provisions of this
Constitution and national laws, the organic act of autonomous regions shall provide for
legislative powers over:
(1) Administrative organization;
(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family, and property relations;
(5) Regional urban and rural planning development;
(6) Economic, social, and tourism development;
(7) Educational policies;
(8) Preservation and development of the cultural heritage; and
(9) Such other matters as may be authorized by law for the promotion of the general
welfare of the people of the region. (Underscoring supplied)
Again on the premise that the BJE may be regarded as an autonomous region, the MOA-AD would
require an amendment that would expand the above-quoted provision. The mere passage of new
legislation pursuant to sub-paragraph No. 9 of said constitutional provision would not suffice, since
any new law that might vest in the BJE the powers found in the MOA-AD must, itself, comply with
other provisions of the Constitution. It would not do, for instance, to merely pass legislation vesting
the BJE with treaty-making power in order to accommodate paragraph 4 of the strand on
RESOURCES which states: "The BJE is free to enter into any economic cooperation and trade
relations with foreign countries: provided, however, that such relationships and understandings do
not include aggression against the Government of the Republic of the Philippines x x x." Under our
constitutional system, it is only the President who has that power. Pimentel v. Executive
Secretary155 instructs:
In our system of government, the President, being the head of state, is regarded as the sole
organ and authority in external relations and is the country's sole representative
with foreign nations. As the chief architect of foreign policy, the President acts as the
country's mouthpiece with respect to international affairs. Hence, the President is vested

with the authority to deal with foreign states and governments, extend or withhold
recognition, maintain diplomatic relations, enter into treaties, and otherwise transact
the business of foreign relations. In the realm of treaty-making, the President has the
sole authority to negotiate with other states. (Emphasis and underscoring supplied)
Article II, Section 22 of the Constitution must also be amended if the scheme envisioned in
the MOA-AD is to be effected. That constitutional provision states: "The State recognizes and
promotes the rights ofindigenous cultural communities within the framework of national unity and
development." (Underscoring supplied) An associative arrangement does not uphold national unity.
While there may be a semblance of unity because of the associative ties between the BJE and the
national government, the act of placing a portion of Philippine territory in a status which, in
international practice, has generally been a preparation for independence, is certainly not conducive
to national unity.
Besides being irreconcilable with the Constitution, the MOA-AD is also inconsistent with
prevailing statutory law, among which are R.A. No. 9054156 or the Organic Act of the ARMM, and
the IPRA.157
Article X, Section 3 of the Organic Act of the ARMM is a bar to the adoption of the definition of
"Bangsamoro people" used in the MOA-AD. Paragraph 1 on Concepts and Principles states:
1. It is the birthright of all Moros and all Indigenous peoples of Mindanao to identify
themselves and be accepted as "Bangsamoros". The Bangsamoro people refers to those
who are natives or original inhabitants of Mindanao and its adjacent islands including
Palawan and the Sulu archipelago at the time of conquest or colonization of its descendants
whether mixed or of full blood. Spouses and their descendants are classified as Bangsamoro.
The freedom of choice of the Indigenous people shall be respected. (Emphasis and
underscoring supplied)
This use of the term Bangsamoro sharply contrasts with that found in the Article X, Section 3 of the
Organic Act, which, rather than lumping together the identities of the Bangsamoro and other
indigenous peoples living in Mindanao, clearly distinguishes between Bangsamoro people and
Tribal peoples, as follows:
"As used in this Organic Act, the phrase "indigenous cultural community" refers to Filipino
citizens residing in the autonomous region who are:
(a) Tribal peoples. These are citizens whose social, cultural and economic conditions
distinguish them from other sectors of the national community; and
(b) Bangsa Moro people. These are citizens who are believers in Islam and who have
retained some or all of their own social, economic, cultural, and political institutions."
Respecting the IPRA, it lays down the prevailing procedure for the delineation and recognition of
ancestral domains. The MOA-AD's manner of delineating the ancestral domain of the Bangsamoro
people is a clear departure from that procedure. By paragraph 1 of Territory, the Parties simply
agree that, subject to the delimitations in the agreed Schedules, "[t]he Bangsamoro homeland and
historic territory refer to the land mass as well as the maritime, terrestrial, fluvial and alluvial

domains, and the aerial domain, the atmospheric space above it, embracing the Mindanao-SuluPalawan geographic region."
Chapter VIII of the IPRA, on the other hand, lays down a detailed procedure, as illustrated in the
following provisions thereof:
SECTION 52. Delineation Process. - The identification and delineation of ancestral domains
shall be done in accordance with the following procedures:
xxxx
b) Petition for Delineation. - The process of delineating a specific perimeter may be initiated
by the NCIP with the consent of the ICC/IP concerned, or through a Petition for Delineation
filed with the NCIP, by a majority of the members of the ICCs/IPs;
c) Delineation Proper. - The official delineation of ancestral domain boundaries including
census of all community members therein, shall be immediately undertaken by the
Ancestral Domains Office upon filing of the application by the ICCs/IPs concerned.
Delineation will be done in coordination with the community concerned and shall at all
times include genuine involvement and participation by the members of the communities
concerned;
d) Proof Required. - Proof of Ancestral Domain Claims shall include the testimony of elders
or community under oath, and other documents directly or indirectly attesting to the
possession or occupation of the area since time immemorial by such ICCs/IPs in the concept
of owners which shall be any one (1) of the following authentic documents:
1) Written accounts of the ICCs/IPs customs and traditions;
2) Written accounts of the ICCs/IPs political structure and institution;
3) Pictures showing long term occupation such as those of old improvements, burial
grounds, sacred places and old villages;
4) Historical accounts, including pacts and agreements concerning boundaries
entered into by the ICCs/IPs concerned with other ICCs/IPs;
5) Survey plans and sketch maps;
6) Anthropological data;
7) Genealogical surveys;
8) Pictures and descriptive histories of traditional communal forests and hunting
grounds;
9) Pictures and descriptive histories of traditional landmarks such as mountains,
rivers, creeks, ridges, hills, terraces and the like; and

10) Write-ups of names and places derived from the native dialect of the
community.
e) Preparation of Maps. - On the basis of such investigation and the findings of fact based
thereon, the Ancestral Domains Office of the NCIP shall prepare a perimeter map, complete
with technical descriptions, and a description of the natural features and landmarks
embraced therein;
f) Report of Investigation and Other Documents. - A complete copy of the preliminary
census and a report of investigation, shall be prepared by the Ancestral Domains Office of
the NCIP;
g) Notice and Publication. - A copy of each document, including a translation in the native
language of the ICCs/IPs concerned shall be posted in a prominent place therein for at least
fifteen (15) days. A copy of the document shall also be posted at the local, provincial and
regional offices of the NCIP, and shall be published in a newspaper of general circulation
once a week for two (2) consecutive weeks to allow other claimants to file opposition
thereto within fifteen (15) days from date of such publication: Provided, That in areas
where no such newspaper exists, broadcasting in a radio station will be a valid substitute:
Provided, further, That mere posting shall be deemed sufficient if both newspaper and radio
station are not available;
h) Endorsement to NCIP. - Within fifteen (15) days from publication, and of the inspection
process, the Ancestral Domains Office shall prepare a report to the NCIP endorsing a
favorable action upon a claim that is deemed to have sufficient proof. However, if the proof
is deemed insufficient, the Ancestral Domains Office shall require the submission of
additional evidence: Provided, That the Ancestral Domains Office shall reject any claim that
is deemed patently false or fraudulent after inspection and verification: Provided, further,
That in case of rejection, the Ancestral Domains Office shall give the applicant due notice,
copy furnished all concerned, containing the grounds for denial. The denial shall be
appealable to the NCIP: Provided, furthermore, That in cases where there are conflicting
claims among ICCs/IPs on the boundaries of ancestral domain claims, the Ancestral
Domains Office shall cause the contending parties to meet and assist them in coming up
with a preliminary resolution of the conflict, without prejudice to its full adjudication
according to the section below.
xxxx
To remove all doubts about the irreconcilability of the MOA-AD with the present legal system, a
discussion of not only the Constitution and domestic statutes, but also of international law is in
order, for
Article II, Section 2 of the Constitution states that the Philippines "adopts the generally
accepted principles of international law as part of the law of the land."
Applying this provision of the Constitution, the Court, in Mejoff v. Director of Prisons,158 held that the
Universal Declaration of Human Rights is part of the law of the land on account of which it ordered
the release on bail of a detained alien of Russian descent whose deportation order had not been

executed even after two years. Similarly, the Court in Agustin v. Edu159 applied the aforesaid
constitutional provision to the 1968 Vienna Convention on Road Signs and Signals.
International law has long recognized the right to self-determination of "peoples," understood not
merely as the entire population of a State but also a portion thereof. In considering the question of
whether the people of Quebec had a right to unilaterally secede from Canada, the Canadian
Supreme Court in REFERENCE RE SECESSION OF QUEBEC160 had occasion to acknowledge that "the
right of a people to self-determination is now so widely recognized in international conventions
that the principle has acquired a status beyond convention' and is considered a general principle of
international law."
Among the conventions referred to are the International Covenant on Civil and Political
Rights161 and the International Covenant on Economic, Social and Cultural Rights162 which state, in
Article 1 of both covenants, that all peoples, by virtue of the right of self-determination, "freely
determine their political status and freely pursue their economic, social, and cultural development."
The people's right to self-determination should not, however, be understood as extending to a
unilateral right of secession. A distinction should be made between the right of internal and
external self-determination. REFERENCE RE SECESSION OF QUEBEC is again instructive:
"(ii) Scope of the Right to Self-determination
126. The recognized sources of international law establish that the right to selfdetermination of a people is normally fulfilled through internal self-determination - a
people's pursuit of its political, economic, social and cultural development within the
framework of an existing state. A right toexternal self-determination (which in this
case potentially takes the form of the assertion of a right to unilateral secession)
arises in only the most extreme of cases and, even then, under carefully defined
circumstances. x x x
External self-determination can be defined as in the following statement from
the Declaration on Friendly Relations, supra, as
The establishment of a sovereign and independent State, the free association or
integration with an independent State or the emergence into any other political
status freely determined by apeople constitute modes of implementing the right of selfdetermination by that people. (Emphasis added)
127. The international law principle of self-determination has evolved within a
framework of respect for the territorial integrity of existing states. The various
international documents that support the existence of a people's right to self-determination
also contain parallel statements supportive of the conclusion that the exercise of such a
right must be sufficiently limited to prevent threats to an existing state's territorial integrity
or the stability of relations between sovereign states.
x x x x (Emphasis, italics and underscoring supplied)
The Canadian Court went on to discuss the exceptional cases in which the right to external selfdetermination can arise, namely, where a people is under colonial rule, is subject to foreign

domination or exploitation outside a colonial context, and - less definitely but asserted by a number
of commentators - is blocked from the meaningful exercise of its right to internal selfdetermination. The Court ultimately held that the population of Quebec had no right to secession, as
the same is not under colonial rule or foreign domination, nor is it being deprived of the freedom to
make political choices and pursue economic, social and cultural development, citing that Quebec is
equitably represented in legislative, executive and judicial institutions within Canada, even
occupying prominent positions therein.
The exceptional nature of the right of secession is further exemplified in the REPORT OF THE
INTERNATIONAL COMMITTEE OF JURISTS ON THE LEGAL ASPECTS OF THE AALAND ISLANDS
QUESTION.163 There, Sweden presented to the Council of the League of Nations the question of
whether the inhabitants of the Aaland Islands should be authorized to determine by plebiscite if the
archipelago should remain under Finnish sovereignty or be incorporated in the kingdom of
Sweden. The Council, before resolving the question, appointed an International Committee
composed of three jurists to submit an opinion on the preliminary issue of whether the dispute
should, based on international law, be entirely left to the domestic jurisdiction of Finland. The
Committee stated the rule as follows:
x x x [I]n the absence of express provisions in international treaties, the right of disposing
of national territory is essentially an attribute of the sovereignty of every State.
Positive International Law does not recognize the right of national groups, as such, to
separate themselves from the State of which they form part by the simple expression
of a wish, any more than it recognizes the right of other States to claim such a
separation. Generally speaking, the grant or refusal of the right to a portion of its
population of determining its own political fate by plebiscite or by some other
method, is, exclusively, an attribute of the sovereignty of every State which is
definitively constituted. A dispute between two States concerning such a question, under
normal conditions therefore, bears upon a question which International Law leaves entirely
to the domestic jurisdiction of one of the States concerned. Any other solution would
amount to an infringement of sovereign rights of a State and would involve the risk of
creating difficulties and a lack of stability which would not only be contrary to the very idea
embodied in term "State," but would also endanger the interests of the international
community. If this right is not possessed by a large or small section of a nation, neither can
it be held by the State to which the national group wishes to be attached, nor by any other
State. (Emphasis and underscoring supplied)
The Committee held that the dispute concerning the Aaland Islands did not refer to a question
which is left by international law to the domestic jurisdiction of Finland, thereby applying the
exception rather than the rule elucidated above. Its ground for departing from the general rule,
however, was a very narrow one, namely, the Aaland Islands agitation originated at a time when
Finland was undergoing drastic political transformation. The internal situation of Finland was,
according to the Committee, so abnormal that, for a considerable time, the conditions required for
the formation of a sovereign State did not exist. In the midst of revolution, anarchy, and civil war,
the legitimacy of the Finnish national government was disputed by a large section of the people, and
it had, in fact, been chased from the capital and forcibly prevented from carrying out its duties. The
armed camps and the police were divided into two opposing forces. In light of these circumstances,
Finland was not, during the relevant time period, a "definitively constituted" sovereign state. The
Committee, therefore, found that Finland did not possess the right to withhold from a portion of its

population the option to separate itself - a right which sovereign nations generally have with
respect to their own populations.
Turning now to the more specific category of indigenous peoples, this term has been used, in
scholarship as well as international, regional, and state practices, to refer to groups with distinct
cultures, histories, and connections to land (spiritual and otherwise) that have been forcibly
incorporated into a larger governing society. These groups are regarded as "indigenous" since they
are the living descendants of pre-invasion inhabitants of lands now dominated by others. Otherwise
stated, indigenous peoples, nations, or communities are culturally distinctive groups that find
themselves engulfed by settler societies born of the forces of empire and conquest.164 Examples of
groups who have been regarded as indigenous peoples are the Maori of New Zealand and the
aboriginal peoples of Canada.
As with the broader category of "peoples," indigenous peoples situated within states do not have a
general right to independence or secession from those states under international law,165 but they do
have rights amounting to what was discussed above as the right to internal self-determination.
In a historic development last September 13, 2007, the UN General Assembly adopted the United
Nations Declaration on the Rights of Indigenous Peoples (UN DRIP) through General Assembly
Resolution 61/295. The vote was 143 to 4, the Philippines being included among those in favor,
and the four voting against being Australia, Canada, New Zealand, and the U.S. The Declaration
clearly recognized the right of indigenous peoples to self-determination, encompassing the
right to autonomy or self-government, to wit:
Article 3
Indigenous peoples have the right to self-determination. By virtue of that right they freely
determine their political status and freely pursue their economic, social and cultural
development.
Article 4
Indigenous peoples, in exercising their right to self-determination, have the right
to autonomy or self-government in matters relating to their internal and local affairs,
as well as ways and means for financing their autonomous functions.
Article 5
Indigenous peoples have the right to maintain and strengthen their distinct political, legal,
economic, social and cultural institutions, while retaining their right to participate fully, if
they so choose, in the political, economic, social and cultural life of the State.
Self-government, as used in international legal discourse pertaining to indigenous peoples, has
been understood as equivalent to "internal self-determination."166 The extent of self-determination
provided for in the UN DRIP is more particularly defined in its subsequent articles, some of which
are quoted hereunder:
Article 8

1. Indigenous peoples and individuals have the right not to be subjected to forced
assimilation or destruction of their culture.
2. States shall provide effective mechanisms for prevention of, and redress for:
(a) Any action which has the aim or effect of depriving them of their integrity as
distinct peoples, or of their cultural values or ethnic identities;
(b) Any action which has the aim or effect of dispossessing them of their lands,
territories or resources;
(c) Any form of forced population transfer which has the aim or effect of violating or
undermining any of their rights;
(d) Any form of forced assimilation or integration;
(e) Any form of propaganda designed to promote or incite racial or ethnic
discrimination directed against them.
Article 21
1. Indigenous peoples have the right, without discrimination, to the improvement of their
economic and social conditions, including, inter alia, in the areas of education, employment,
vocational training and retraining, housing, sanitation, health and social security.
2. States shall take effective measures and, where appropriate, special measures to ensure
continuing improvement of their economic and social conditions. Particular attention shall
be paid to the rights and special needs of indigenous elders, women, youth, children and
persons with disabilities.
Article 26
1. Indigenous peoples have the right to the lands, territories and resources which
they have traditionally owned, occupied or otherwise used or acquired.
2. Indigenous peoples have the right to own, use, develop and control the lands, territories
and resources that they possess by reason of traditional ownership or other traditional
occupation or use, as well as those which they have otherwise acquired.
3. States shall give legal recognition and protection to these lands, territories and resources.
Such recognition shall be conducted with due respect to the customs, traditions and land
tenure systems of the indigenous peoples concerned.
Article 30
1. Military activities shall not take place in the lands or territories of indigenous peoples,
unless justified by a relevant public interest or otherwise freely agreed with or requested by
the indigenous peoples concerned.

2. States shall undertake effective consultations with the indigenous peoples concerned,
through appropriate procedures and in particular through their representative institutions,
prior to using their lands or territories for military activities.
Article 32
1. Indigenous peoples have the right to determine and develop priorities and strategies for
the development or use of their lands or territories and other resources.
2. States shall consult and cooperate in good faith with the indigenous peoples concerned
through their own representative institutions in order to obtain their free and informed
consent prior to the approval of any project affecting their lands or territories and other
resources, particularly in connection with the development, utilization or exploitation of
mineral, water or other resources.
3. States shall provide effective mechanisms for just and fair redress for any such activities,
and appropriate measures shall be taken to mitigate adverse environmental, economic,
social, cultural or spiritual impact.
Article 37
1. Indigenous peoples have the right to the recognition, observance and enforcement of
treaties, agreements and other constructive arrangements concluded with States or their
successors and to have States honour and respect such treaties, agreements and other
constructive arrangements.
2. Nothing in this Declaration may be interpreted as diminishing or eliminating the rights of
indigenous peoples contained in treaties, agreements and other constructive arrangements.
Article 38
States in consultation and cooperation with indigenous peoples, shall take the appropriate
measures, including legislative measures, to achieve the ends of this Declaration.
Assuming that the UN DRIP, like the Universal Declaration on Human Rights, must now be regarded
as embodying customary international law - a question which the Court need not definitively
resolve here - the obligations enumerated therein do not strictly require the Republic to grant the
Bangsamoro people, through the instrumentality of the BJE, the particular rights and powers
provided for in the MOA-AD. Even the more specific provisions of the UN DRIP are general in scope,
allowing for flexibility in its application by the different States.
There is, for instance, no requirement in the UN DRIP that States now guarantee indigenous peoples
their own police and internal security force. Indeed, Article 8 presupposes that it is the State which
will provide protection for indigenous peoples against acts like the forced dispossession of their
lands - a function that is normally performed by police officers. If the protection of a right so
essential to indigenous people's identity is acknowledged to be the responsibility of the State, then
surely the protection of rights less significant to them as such peoples would also be the duty of
States. Nor is there in the UN DRIP an acknowledgement of the right of indigenous peoples to the
aerial domain and atmospheric space. What it upholds, in Article 26 thereof, is the right of

indigenous peoples to the lands, territories and resources which they have traditionally owned,
occupied or otherwise used or acquired.
Moreover, the UN DRIP, while upholding the right of indigenous peoples to autonomy, does not
obligate States to grant indigenous peoples the near-independent status of an associated state. All
the rights recognized in that document are qualified in Article 46 as follows:
1. Nothing in this Declaration may be interpreted as implying for any State, people, group
or person any right to engage in any activity or to perform any act contrary to the Charter of
the United Nations orconstrued as authorizing or encouraging any action which would
dismember or impair, totally or in part, the territorial integrity or political unity of
sovereign and independent States.
Even if the UN DRIP were considered as part of the law of the land pursuant to Article II, Section 2
of the Constitution, it would not suffice to uphold the validity of the MOA-AD so as to render its
compliance with other laws unnecessary.
It is, therefore, clear that the MOA-AD contains numerous provisions that cannot be
reconciled with the Constitution and the laws as presently worded. Respondents proffer,
however, that the signing of the MOA-AD alone would not have entailed any violation of law or
grave abuse of discretion on their part, precisely because it stipulates that the provisions thereof
inconsistent with the laws shall not take effect until these laws are amended. They cite paragraph 7
of the MOA-AD strand on GOVERNANCE quoted earlier, but which is reproduced below for
convenience:
7. The Parties agree that the mechanisms and modalities for the actual implementation of
this MOA-AD shall be spelt out in the Comprehensive Compact to mutually take such steps
to enable it to occur effectively.
Any provisions of the MOA-AD requiring amendments to the existing legal framework shall
come into force upon signing of a Comprehensive Compact and upon effecting the necessary
changes to the legal framework with due regard to non derogation of prior agreements and
within the stipulated timeframe to be contained in the Comprehensive Compact.
Indeed, the foregoing stipulation keeps many controversial provisions of the MOA-AD from coming
into force until the necessary changes to the legal framework are effected. While the word
"Constitution" is not mentioned in the provision now under consideration or anywhere else
in the MOA-AD, the term "legal framework" is certainly broad enough to include the
Constitution.
Notwithstanding the suspensive clause, however, respondents, by their mere act of incorporating in
the MOA-AD the provisions thereof regarding the associative relationship between the BJE and the
Central Government, have already violated the Memorandum of Instructions From The President
dated March 1, 2001, which states that the "negotiations shall be conducted in accordance with x x x
the principles of the sovereignty and territorial integrityof the Republic of the Philippines."
(Emphasis supplied) Establishing an associative relationship between the BJE and the Central
Government is, for the reasons already discussed, a preparation for independence, or worse, an
implicit acknowledgment of an independent status already prevailing.

Even apart from the above-mentioned Memorandum, however, the MOA-AD is defective because
the suspensive clause is invalid, as discussed below.
The authority of the GRP Peace Negotiating Panel to negotiate with the MILF is founded on E.O. No.
3, Section 5(c), which states that there shall be established Government Peace Negotiating Panels
for negotiations with different rebel groups to be "appointed by the President as her official
emissaries to conduct negotiations, dialogues, and face-to-face discussions with rebel groups."
These negotiating panels are to report to the President, through the PAPP on the conduct and
progress of the negotiations.
It bears noting that the GRP Peace Panel, in exploring lasting solutions to the Moro Problem
through its negotiations with the MILF, was not restricted by E.O. No. 3 only to those options
available under the laws as they presently stand. One of the components of a comprehensive peace
process, which E.O. No. 3 collectively refers to as the "Paths to Peace," is the pursuit of social,
economic, and political reforms which may require new legislation or even constitutional
amendments. Sec. 4(a) of E.O. No. 3, which reiterates Section 3(a), of E.O. No. 125,167 states:
SECTION 4. The Six Paths to Peace. - The components of the comprehensive peace process
comprise the processes known as the "Paths to Peace". These component processes are
interrelated and not mutually exclusive, and must therefore be pursued simultaneously in a
coordinated and integrated fashion. They shall include, but may not be limited to, the
following:
a. PURSUIT OF SOCIAL, ECONOMIC AND POLITICAL REFORMS. This component involves
the vigorous implementation of various policies, reforms, programs and projects
aimed at addressing the root causes of internal armed conflicts and social unrest.
This may require administrative action, new legislation or even constitutional
amendments.
x x x x (Emphasis supplied)
The MOA-AD, therefore, may reasonably be perceived as an attempt of respondents to address,
pursuant to this provision of E.O. No. 3, the root causes of the armed conflict in Mindanao. The E.O.
authorized them to "think outside the box," so to speak. Hence, they negotiated and were set on
signing the MOA-AD that included various social, economic, and political reforms which cannot,
however, all be accommodated within the present legal framework, and which thus would require
new legislation and constitutional amendments.
The inquiry on the legality of the "suspensive clause," however, cannot stop here, because it must
be askedwhether the President herself may exercise the power delegated to the GRP Peace
Panel under E.O. No. 3, Sec. 4(a).
The President cannot delegate a power that she herself does not possess. May the President, in the
course of peace negotiations, agree to pursue reforms that would require new legislation and
constitutional amendments, or should the reforms be restricted only to those solutions which the
present laws allow? The answer to this question requires a discussion of the extent of the
President's power to conduct peace negotiations.

That the authority of the President to conduct peace negotiations with rebel groups is not explicitly
mentioned in the Constitution does not mean that she has no such authority. In Sanlakas v.
Executive Secretary,168 in issue was the authority of the President to declare a state of rebellion - an
authority which is not expressly provided for in the Constitution. The Court held thus:
"In her ponencia in Marcos v. Manglapus, Justice Cortes put her thesis into jurisprudence.
There, the Court, by a slim 8-7 margin, upheld the President's power to forbid the return of
her exiled predecessor. The rationale for the majority's ruling rested on the President's
. . . unstated residual powers which are implied from the grant of executive
power and which are necessary for her to comply with her duties under the
Constitution. The powers of the President are not limited to what are
expressly enumerated in the article on the Executive Department and in
scattered provisions of the Constitution. This is so, notwithstanding the avowed
intent of the members of the Constitutional Commission of 1986 to limit the powers
of the President as a reaction to the abuses under the regime of Mr. Marcos, for the
result was a limitation of specific powers of the President, particularly those relating
to the commander-in-chief clause, but not a diminution of the general grant of
executive power.
Thus, the President's authority to declare a state of rebellion springs in the main from
her powers as chief executive and, at the same time, draws strength from her
Commander-in-Chief powers. x x x (Emphasis and underscoring supplied)
Similarly, the President's power to conduct peace negotiations is implicitly included in her powers
as Chief Executive and Commander-in-Chief. As Chief Executive, the President has the general
responsibility to promote public peace, and as Commander-in-Chief, she has the more specific duty
to prevent and suppress rebellion and lawless violence.169
As the experience of nations which have similarly gone through internal armed conflict will show,
however, peace is rarely attained by simply pursuing a military solution. Oftentimes, changes as farreaching as a fundamental reconfiguration of the nation's constitutional structure is required. The
observations of Dr. Kirsti Samuels are enlightening, to wit:
x x x [T]he fact remains that a successful political and governance transition must form the
core of any post-conflict peace-building mission. As we have observed in Liberia and Haiti
over the last ten years, conflict cessation without modification of the political environment,
even where state-building is undertaken through technical electoral assistance and
institution- or capacity-building, is unlikely to succeed. On average, more than 50 percent of
states emerging from conflict return to conflict. Moreover, a substantial proportion of
transitions have resulted in weak or limited democracies.
The design of a constitution and its constitution-making process can play an important role
in the political and governance transition. Constitution-making after conflict is an
opportunity to create a common vision of the future of a state and a road map on how to get
there. The constitution can be partly a peace agreement and partly a framework setting up
the rules by which the new democracy will operate.170

In the same vein, Professor Christine Bell, in her article on the nature and legal status of peace
agreements, observed that the typical way that peace agreements establish or confirm mechanisms
for demilitarization and demobilization is by linking them to new constitutional
structures addressing governance, elections, and legal and human rights institutions.171
In the Philippine experience, the link between peace agreements and constitution-making has been
recognized by no less than the framers of the Constitution. Behind the provisions of the
Constitution on autonomous regions172is the framers' intention to implement a particular peace
agreement, namely, the Tripoli Agreement of 1976 between the GRP and the MNLF, signed by then
Undersecretary of National Defense Carmelo Z. Barbero and then MNLF Chairman Nur Misuari.
MR. ROMULO. There are other speakers; so, although I have some more questions, I will
reserve my right to ask them if they are not covered by the other speakers. I have only two
questions.
I heard one of the Commissioners say that local autonomy already exists in the
Muslim region; it is working very well; it has, in fact, diminished a great deal of the
problems. So, my question is: since that already exists, why do we have to go into
something new?
MR. OPLE. May I answer that on behalf of Chairman Nolledo. Commissioner Yusup
Abubakar is right thatcertain definite steps have been taken to implement the
provisions of the Tripoli Agreement with respect to an autonomous region in
Mindanao. This is a good first step, but there is no question that this is merely a
partial response to the Tripoli Agreement itself and to the fuller standard of regional
autonomy contemplated in that agreement, and now by state policy.173(Emphasis
supplied)
The constitutional provisions on autonomy and the statutes enacted pursuant to them have, to the
credit of their drafters, been partly successful. Nonetheless, the Filipino people are still faced with
the reality of an on-going conflict between the Government and the MILF. If the President is to be
expected to find means for bringing this conflict to an end and to achieve lasting peace in Mindanao,
then she must be given the leeway to explore, in the course of peace negotiations, solutions that
may require changes to the Constitution for their implementation. Being uniquely vested with the
power to conduct peace negotiations with rebel groups, the President is in a singular position to
know the precise nature of their grievances which, if resolved, may bring an end to hostilities.
The President may not, of course, unilaterally implement the solutions that she considers viable,
but she may not be prevented from submitting them as recommendations to Congress, which could
then, if it is minded, act upon them pursuant to the legal procedures for constitutional amendment
and revision. In particular, Congress would have the option, pursuant to Article XVII, Sections 1 and
3 of the Constitution, to propose the recommended amendments or revision to the people, call a
constitutional convention, or submit to the electorate the question of calling such a convention.
While the President does not possess constituent powers - as those powers may be exercised only
by Congress, a Constitutional Convention, or the people through initiative and referendum - she
may submit proposals for constitutional change to Congress in a manner that does not involve the
arrogation of constituent powers.

In Sanidad v. COMELEC,174 in issue was the legality of then President Marcos' act of directly
submitting proposals for constitutional amendments to a referendum, bypassing the interim
National Assembly which was the body vested by the 1973 Constitution with the power to propose
such amendments. President Marcos, it will be recalled, never convened the interim National
Assembly. The majority upheld the President's act, holding that "the urges of absolute necessity"
compelled the President as the agent of the people to act as he did, there being no interim National
Assembly to propose constitutional amendments. Against this ruling, Justices Teehankee and
Muoz Palma vigorously dissented. The Court's concern at present, however, is not with regard to
the point on which it was then divided in that controversial case, but on that which was not
disputed by either side.
Justice Teehankee's dissent,175 in particular, bears noting. While he disagreed that the President
may directly submit proposed constitutional amendments to a referendum, implicit in his opinion is
a recognition that he would have upheld the President's action along with the majority had the
President convened the interim National Assembly and coursed his proposals through it. Thus
Justice Teehankee opined:
"Since the Constitution provides for the organization of the essential departments of
government, defines and delimits the powers of each and prescribes the manner of the
exercise of such powers, and the constituent power has not been granted to but has been
withheld from the President or Prime Minister, it follows that the President's questioned
decrees proposing and submitting constitutional amendments directly to the
people (without the intervention of the interim National Assembly in whom the power
is expressly vested) are devoid of constitutional and legal basis."176 (Emphasis supplied)
From the foregoing discussion, the principle may be inferred that the President - in the course of
conducting peace negotiations - may validly consider implementing even those policies that require
changes to the Constitution, but she may not unilaterally implement them without the
intervention of Congress, or act in any way as if the assent of that body were assumed as a
certainty.
Since, under the present Constitution, the people also have the power to directly propose
amendments through initiative and referendum, the President may also submit her
recommendations to the people, not as a formal proposal to be voted on in a plebiscite similar to
what President Marcos did in Sanidad, but for their independent consideration of whether these
recommendations merit being formally proposed through initiative.
These recommendations, however, may amount to nothing more than the President's suggestions
to the people, for any further involvement in the process of initiative by the Chief Executive may
vitiate its character as a genuine "people's initiative." The only initiative recognized by the
Constitution is that which truly proceeds from the people. As the Court stated in Lambino v.
COMELEC:177
"The Lambino Group claims that their initiative is the people's voice.' However, the
Lambino Group unabashedly states in ULAP Resolution No. 2006-02, in the verification of
their petition with the COMELEC, that ULAP maintains its unqualified support to the
agenda of Her Excellency President Gloria Macapagal-Arroyo for constitutional reforms.'
The Lambino Group thus admits that their people's' initiative is an unqualified support
to the agenda' of the incumbent President to change the Constitution. This forewarns the

Court to be wary of incantations of people's voice' or sovereign will' in the present

initiative."
It will be observed that the President has authority, as stated in her oath of office,178 only
to preserve and defend the Constitution. Such presidential power does not, however, extend to
allowing her to change the Constitution, but simply to recommend proposed amendments or
revision. As long as she limits herself to recommending these changes and submits to the proper
procedure for constitutional amendments and revision, her mere recommendation need not be
construed as an unconstitutional act.
The foregoing discussion focused on the President's authority to
propose constitutional amendments, since her authority to propose new legislation is not in
controversy. It has been an accepted practice for Presidents in this jurisdiction to propose new
legislation. One of the more prominent instances the practice is usually done is in the yearly State of
the Nation Address of the President to Congress. Moreover, the annual general appropriations bill
has always been based on the budget prepared by the President, which - for all intents and
purposes - is a proposal for new legislation coming from the President.179
The "suspensive clause" in the MOA-AD viewed in light of the above-discussed standards
Given the limited nature of the President's authority to propose constitutional amendments,
she cannot guarantee to any third party that the required amendments will eventually be put in
place, nor even be submitted to a plebiscite. The most she could do is submit these proposals as
recommendations either to Congress or the people, in whom constituent powers are vested.
Paragraph 7 on Governance of the MOA-AD states, however, that all provisions thereof which
cannot be reconciled with the present Constitution and laws "shall come into force upon signing of
a Comprehensive Compact and upon effecting the necessary changes to the legal framework." This
stipulation does not bear the marks of a suspensive condition - defined in civil law as a future
and uncertain event - but of a term. It is not a question of whether the necessary changes to the
legal framework will be effected, but when. That there is no uncertainty being contemplated is
plain from what follows, for the paragraph goes on to state that the contemplated changes shall be
"with due regard to non derogation of prior agreements and within the stipulated timeframe to be
contained in the Comprehensive Compact."
Pursuant to this stipulation, therefore, it is mandatory for the GRP to effect the changes to the legal
framework contemplated in the MOA-AD - which changes would include constitutional
amendments, as discussed earlier. It bears noting that,
By the time these changes are put in place, the MOA-AD itself would be counted among the
"prior agreements" from which there could be no derogation.
What remains for discussion in the Comprehensive Compact would merely be the implementing
details for these "consensus points" and, notably, the deadline for effecting the contemplated
changes to the legal framework.
Plainly, stipulation-paragraph 7 on GOVERNANCE is inconsistent with the limits of the
President's authority to propose constitutional amendments, it being a virtual guarantee that
the Constitution and the laws of the Republic of the Philippines will certainly be adjusted to

conform to all the "consensus points" found in the MOA-AD. Hence, it must be struck down
as unconstitutional.
A comparison between the "suspensive clause" of the MOA-AD with a similar provision appearing
in the 1996 final peace agreement between the MNLF and the GRP is most instructive.
As a backdrop, the parties to the 1996 Agreement stipulated that it would be implemented in two
phases. Phase Icovered a three-year transitional period involving the putting up of new
administrative structures through Executive Order, such as the Special Zone of Peace and
Development (SZOPAD) and the Southern Philippines Council for Peace and Development (SPCPD),
while Phase II covered the establishment of the new regional autonomous government through
amendment or repeal of R.A. No. 6734, which was then the Organic Act of the ARMM.
The stipulations on Phase II consisted of specific agreements on the structure of the expanded
autonomous region envisioned by the parties. To that extent, they are similar to the provisions of
the MOA-AD. There is, however, a crucial difference between the two agreements. While the MOAAD virtually guarantees that the "necessary changes to the legal framework" will be put in
place, the GRP-MNLF final peace agreement states thus: "Accordingly, these provisions [on Phase
II] shall be recommended by the GRP to Congress for incorporation in the amendatory or
repealing law."
Concerns have been raised that the MOA-AD would have given rise to a binding international law
obligation on the part of the Philippines to change its Constitution in conformity thereto, on the
ground that it may be considered either as a binding agreement under international law, or a
unilateral declaration of the Philippine government to the international community that it would
grant to the Bangsamoro people all the concessions therein stated. Neither ground finds sufficient
support in international law, however.
The MOA-AD, as earlier mentioned in the overview thereof, would have included foreign dignitaries
as signatories. In addition, representatives of other nations were invited to witness its signing in
Kuala Lumpur. These circumstances readily lead one to surmise that the MOA-AD would have had
the status of a binding international agreement had it been signed. An examination of the prevailing
principles in international law, however, leads to the contrary conclusion.
The Decision on Challenge to Jurisdiction: Lom Accord Amnesty180 (the Lom Accord case) of the
Special Court of Sierra Leone is enlightening. The Lom Accord was a peace agreement signed on
July 7, 1999 between the Government of Sierra Leone and the Revolutionary United Front (RUF), a
rebel group with which the Sierra Leone Government had been in armed conflict for around eight
years at the time of signing. There were non-contracting signatories to the agreement, among which
were the Government of the Togolese Republic, the Economic Community of West African States,
and the UN.
On January 16, 2002, after a successful negotiation between the UN Secretary-General and the
Sierra Leone Government, another agreement was entered into by the UN and that Government
whereby the Special Court of Sierra Leone was established. The sole purpose of the Special Court,
an international court, was to try persons who bore the greatest responsibility for serious
violations of international humanitarian law and Sierra Leonean law committed in the territory of
Sierra Leone since November 30, 1996.

Among the stipulations of the Lom Accord was a provision for the full pardon of the members of
the RUF with respect to anything done by them in pursuit of their objectives as members of that
organization since the conflict began.
In the Lom Accord case, the Defence argued that the Accord created an internationally
binding obligation not to prosecute the beneficiaries of the amnesty provided therein, citing,
among other things, the participation of foreign dignitaries and international organizations in the
finalization of that agreement. The Special Court, however, rejected this argument, ruling that the
Lome Accord is not a treaty and that it can only create binding obligations and rights between the
parties in municipal law, not in international law. Hence, the Special Court held, it is ineffective in
depriving an international court like it of jurisdiction.
"37. In regard to the nature of a negotiated settlement of an internal armed conflict it is
easy to assume and to argue with some degree of plausibility, as Defence counsel for
the defendants seem to have done, that the mere fact that in addition to the parties to
the conflict, the document formalizing the settlement is signed by foreign heads of
state or their representatives and representatives of international organizations,
means the agreement of the parties is internationalized so as to create obligations in
international law.
xxxx
40. Almost every conflict resolution will involve the parties to the conflict and the mediator
or facilitator of the settlement, or persons or bodies under whose auspices the settlement
took place but who are not at all parties to the conflict, are not contracting parties and who
do not claim any obligation from the contracting parties or incur any obligation from the
settlement.
41. In this case, the parties to the conflict are the lawful authority of the State and the
RUF which has no status of statehood and is to all intents and purposes a faction
within the state. The non-contracting signatories of the Lom Agreement were moral
guarantors of the principle that, in the terms of Article XXXIV of the Agreement, "this
peace agreement is implemented with integrity and in good faith by both parties".
The moral guarantors assumed no legal obligation. It is recalled that the UN by its
representative appended, presumably for avoidance of doubt, an understanding of the
extent of the agreement to be implemented as not including certain international crimes.
42. An international agreement in the nature of a treaty must create rights and obligations
regulated by international law so that a breach of its terms will be a breach determined
under international law which will also provide principle means of enforcement. The Lom
Agreement created neither rights nor obligations capable of being regulated by
international law. An agreement such as the Lom Agreement which brings to an end
an internal armed conflict no doubt creates a factual situation of restoration of peace
that the international community acting through the Security Council may take note
of. That, however, will not convert it to an international agreement which creates an
obligation enforceable in international, as distinguished from municipal, law. A
breach of the terms of such a peace agreement resulting in resumption of internal armed
conflict or creating a threat to peace in the determination of the Security Council may
indicate a reversal of the factual situation of peace to be visited with possible legal

consequences arising from the new situation of conflict created. Such consequences such as
action by the Security Council pursuant to Chapter VII arise from the situation and not from
the agreement, nor from the obligation imposed by it. Such action cannot be regarded as a
remedy for the breach. A peace agreement which settles an internal armed conflict
cannot be ascribed the same status as one which settles an international armed
conflict which, essentially, must be between two or more warring States. The Lom
Agreement cannot be characterised as an international instrument. x x x" (Emphasis,
italics and underscoring supplied)
Similarly, that the MOA-AD would have been signed by representatives of States and international
organizations not parties to the Agreement would not have sufficed to vest in it a binding character
under international law.
In another vein, concern has been raised that the MOA-AD would amount to a unilateral declaration
of the Philippine State, binding under international law, that it would comply with all the
stipulations stated therein, with the result that it would have to amend its Constitution accordingly
regardless of the true will of the people. Cited as authority for this view is Australia v. France,181 also
known as the Nuclear Tests Case, decided by the International Court of Justice (ICJ).
In the Nuclear Tests Case, Australia challenged before the ICJ the legality of France's nuclear tests in
the South Pacific. France refused to appear in the case, but public statements from its President, and
similar statements from other French officials including its Minister of Defence, that its 1974 series
of atmospheric tests would be its last, persuaded the ICJ to dismiss the case.182 Those statements,
the ICJ held, amounted to a legal undertaking addressed to the international community, which
required no acceptance from other States for it to become effective.
Essential to the ICJ ruling is its finding that the French government intended to be bound to the
international community in issuing its public statements, viz:
43. It is well recognized that declarations made by way of unilateral acts, concerning legal or
factual situations, may have the effect of creating legal obligations. Declarations of this kind
may be, and often are, very specific. When it is the intention of the State making the
declaration that it should become bound according to its terms, that intention confers
on the declaration the character of a legal undertaking, the State being thenceforth
legally required to follow a course of conduct consistent with the declaration. An
undertaking of this kind, if given publicly, and with an intent to be bound, even though not
made within the context of international negotiations, is binding. In these circumstances,
nothing in the nature of a quid pro quo nor any subsequent acceptance of the declaration,
nor even any reply or reaction from other States, is required for the declaration to take
effect, since such a requirement would be inconsistent with the strictly unilateral nature of
the juridical act by which the pronouncement by the State was made.
44. Of course, not all unilateral acts imply obligation; but a State may choose to take up
a certain position in relation to a particular matter with the intention of being boundthe intention is to be ascertained by interpretation of the act. When States make
statements by which their freedom of action is to be limited, a restrictive interpretation is
called for.
xxxx

51. In announcing that the 1974 series of atmospheric tests would be the last, the
French Government conveyed to the world at large, including the Applicant, its
intention effectively to terminate these tests. It was bound to assume that other
States might take note of these statements and rely on their being effective. The
validity of these statements and their legal consequences must be considered within
the general framework of the security of international intercourse, and the confidence
and trust which are so essential in the relations among States. It is from the actual
substance of these statements, and from the circumstances attending their making,
that the legal implications of the unilateral act must be deduced. The objects of these
statements are clear and they were addressed to the international community as a
whole, and the Court holds that they constitute an undertaking possessing legal
effect. The Court considers *270 that the President of the Republic, in deciding upon the
effective cessation of atmospheric tests, gave an undertaking to the international
community to which his words were addressed. x x x (Emphasis and underscoring
supplied)
As gathered from the above-quoted ruling of the ICJ, public statements of a state representative
may be construed as a unilateral declaration only when the following conditions are present: the
statements were clearly addressed to the international community, the state intended to be bound
to that community by its statements, and that not to give legal effect to those statements would be
detrimental to the security of international intercourse. Plainly, unilateral declarations arise only in
peculiar circumstances.
The limited applicability of the Nuclear Tests Case ruling was recognized in a later case decided by
the ICJ entitled Burkina Faso v. Mali,183 also known as the Case Concerning the Frontier Dispute. The
public declaration subject of that case was a statement made by the President of Mali, in an
interview by a foreign press agency, that Mali would abide by the decision to be issued by a
commission of the Organization of African Unity on a frontier dispute then pending between Mali
and Burkina Faso.
Unlike in the Nuclear Tests Case, the ICJ held that the statement of Mali's President was not a
unilateral act with legal implications. It clarified that its ruling in the Nuclear Tests case rested on
the peculiar circumstances surrounding the French declaration subject thereof, to wit:
40. In order to assess the intentions of the author of a unilateral act, account must be taken
of all the factual circumstances in which the act occurred. For example, in the Nuclear
Tests cases, the Court took the view that since the applicant States were not the only
ones concerned at the possible continuance of atmospheric testing by the French
Government, that Government's unilateral declarations had conveyed to the world at
large, including the Applicant, its intention effectively to terminate these tests (I.C.J.
Reports 1974, p. 269, para. 51; p. 474, para. 53). In the particular circumstances of those
cases, the French Government could not express an intention to be bound otherwise
than by unilateral declarations. It is difficult to see how it could have accepted the
terms of a negotiated solution with each of the applicants without thereby
jeopardizing its contention that its conduct was lawful. The circumstances of the
present case are radically different. Here, there was nothing to hinder the Parties
from manifesting an intention to accept the binding character of the conclusions of
the Organization of African Unity Mediation Commission by the normal method: a
formal agreement on the basis of reciprocity. Since no agreement of this kind was

concluded between the Parties, the Chamber finds that there are no grounds to interpret the
declaration made by Mali's head of State on 11 April 1975 as a unilateral act with legal
implications in regard to the present case. (Emphasis and underscoring supplied)
Assessing the MOA-AD in light of the above criteria, it would not have amounted to a unilateral
declaration on the part of the Philippine State to the international community. The Philippine panel
did not draft the same with the clear intention of being bound thereby to the international
community as a whole or to any State, but only to the MILF. While there were States and
international organizations involved, one way or another, in the negotiation and projected signing
of the MOA-AD, they participated merely as witnesses or, in the case of Malaysia, as facilitator. As
held in the Lom Accord case, the mere fact that in addition to the parties to the conflict, the peace
settlement is signed by representatives of states and international organizations does not mean
that the agreement is internationalized so as to create obligations in international law.
Since the commitments in the MOA-AD were not addressed to States, not to give legal effect to such
commitments would not be detrimental to the security of international intercourse - to the trust
and confidence essential in the relations among States.
In one important respect, the circumstances surrounding the MOA-AD are closer to that of Burkina
Faso wherein, as already discussed, the Mali President's statement was not held to be a binding
unilateral declaration by the ICJ. As in that case, there was also nothing to hinder the Philippine
panel, had it really been its intention to be bound to other States, to manifest that intention by
formal agreement. Here, that formal agreement would have come about by the inclusion in the
MOA-AD of a clear commitment to be legally bound to the international community, not just the
MILF, and by an equally clear indication that the signatures of the participating statesrepresentatives would constitute an acceptance of that commitment. Entering into such a formal
agreement would not have resulted in a loss of face for the Philippine government before the
international community, which was one of the difficulties that prevented the French Government
from entering into a formal agreement with other countries. That the Philippine panel did not enter
into such a formal agreement suggests that it had no intention to be bound to the international
community. On that ground, the MOA-AD may not be considered a unilateral declaration under
international law.
The MOA-AD not being a document that can bind the Philippines under international law
notwithstanding, respondents' almost consummated act of guaranteeing amendments to the
legal framework is, by itself, sufficient to constitute grave abuse of discretion. The grave
abuse lies not in the fact that they considered, as a solution to the Moro Problem, the creation of a
state within a state, but in their brazen willingness toguarantee that Congress and the
sovereign Filipino people would give their imprimatur to their solution. Upholding such an act
would amount to authorizing a usurpation of the constituent powers vested only in Congress, a
Constitutional Convention, or the people themselves through the process of initiative, for the only
way that the Executive can ensure the outcome of the amendment process is through an undue
influence or interference with that process.
The sovereign people may, if it so desired, go to the extent of giving up a portion of its own territory
to the Moros for the sake of peace, for it can change the Constitution in any it wants, so long as the
change is not inconsistent with what, in international law, is known as Jus Cogens.184 Respondents,
however, may not preempt it in that decision.

SUMMARY
The petitions are ripe for adjudication. The failure of respondents to consult the local government
units or communities affected constitutes a departure by respondents from their mandate under
E.O. No. 3. Moreover, respondents exceeded their authority by the mere act of guaranteeing
amendments to the Constitution. Any alleged violation of the Constitution by any branch of
government is a proper matter for judicial review.
As the petitions involve constitutional issues which are of paramount public interest or of
transcendental importance, the Court grants the petitioners, petitioners-in-intervention and
intervening respondents the requisitelocus standi in keeping with the liberal stance adopted
in David v. Macapagal-Arroyo.
Contrary to the assertion of respondents that the non-signing of the MOA-AD and the eventual
dissolution of the GRP Peace Panel mooted the present petitions, the Court finds that the present
petitions provide an exception to the "moot and academic" principle in view of (a) the grave
violation of the Constitution involved; (b) the exceptional character of the situation and paramount
public interest; (c) the need to formulate controlling principles to guide the bench, the bar, and the
public; and (d) the fact that the case is capable of repetition yet evading review.
The MOA-AD is a significant part of a series of agreements necessary to carry out the GRP-MILF
Tripoli Agreement on Peace signed by the government and the MILF back in June 2001. Hence, the
present MOA-AD can be renegotiated or another one drawn up that could contain similar or
significantly dissimilar provisions compared to the original.
The Court, however, finds that the prayers for mandamus have been rendered moot in view of the
respondents' action in providing the Court and the petitioners with the official copy of the final
draft of the MOA-AD and its annexes.
The people's right to information on matters of public concern under Sec. 7, Article III of the
Constitution is insplendid symmetry with the state policy of full public disclosure of all its
transactions involving public interest under Sec. 28, Article II of the Constitution. The right to
information guarantees the right of the people to demand information, while Section 28 recognizes
the duty of officialdom to give information even if nobody demands. The complete and effective
exercise of the right to information necessitates that its complementary provision on public
disclosure derive the same self-executory nature, subject only to reasonable safeguards or
limitations as may be provided by law.
The contents of the MOA-AD is a matter of paramount public concern involving public interest in
the highest order. In declaring that the right to information contemplates steps and negotiations
leading to the consummation of the contract, jurisprudence finds no distinction as to the executory
nature or commercial character of the agreement.
An essential element of these twin freedoms is to keep a continuing dialogue or process of
communication between the government and the people. Corollary to these twin rights is the
design for feedback mechanisms. The right to public consultation was envisioned to be a species of
these public rights.

At least three pertinent laws animate these constitutional imperatives and justify the exercise of the
people's right to be consulted on relevant matters relating to the peace agenda.
One, E.O. No. 3 itself is replete with mechanics for continuing consultations on both national and
local levels and for a principal forum for consensus-building. In fact, it is the duty of the Presidential
Adviser on the Peace Process to conduct regular dialogues to seek relevant information, comments,
advice, and recommendations from peace partners and concerned sectors of society.
Two, Republic Act No. 7160 or the Local Government Code of 1991 requires all national offices to
conduct consultations before any project or program critical to the environment and human
ecology including those that may call for the eviction of a particular group of people residing in such
locality, is implemented therein. The MOA-AD is one peculiar program that unequivocally and
unilaterally vests ownership of a vast territory to the Bangsamoro people, which could pervasively
and drastically result to the diaspora or displacement of a great number of inhabitants from their
total environment.
Three, Republic Act No. 8371 or the Indigenous Peoples Rights Act of 1997 provides for clear-cut
procedure for the recognition and delineation of ancestral domain, which entails, among other
things, the observance of the free and prior informed consent of the Indigenous Cultural
Communities/Indigenous Peoples. Notably, the statute does not grant the Executive Department or
any government agency the power to delineate and recognize an ancestral domain claim by mere
agreement or compromise.
The invocation of the doctrine of executive privilege as a defense to the general right to information
or the specific right to consultation is untenable. The various explicit legal provisions fly in the face
of executive secrecy. In any event, respondents effectively waived such defense after it
unconditionally disclosed the official copies of the final draft of the MOA-AD, for judicial compliance
and public scrutiny.
In sum, the Presidential Adviser on the Peace Process committed grave abuse of discretion when he
failed to carry out the pertinent consultation process, as mandated by E.O. No. 3, Republic Act No.
7160, and Republic Act No. 8371. The furtive process by which the MOA-AD was designed and
crafted runs contrary to and in excess of the legal authority, and amounts to a whimsical, capricious,
oppressive, arbitrary and despotic exercise thereof. It illustrates a gross evasion of positive duty
and a virtual refusal to perform the duty enjoined.
The MOA-AD cannot be reconciled with the present Constitution and laws. Not only its specific
provisions but the very concept underlying them, namely, the associative relationship envisioned
between the GRP and the BJE, areunconstitutional, for the concept presupposes that the
associated entity is a state and implies that the same is on its way to independence.
While there is a clause in the MOA-AD stating that the provisions thereof inconsistent with the
present legal framework will not be effective until that framework is amended, the same does not
cure its defect. The inclusion of provisions in the MOA-AD establishing an associative relationship
between the BJE and the Central Government is, itself, a violation of the Memorandum of
Instructions From The President dated March 1, 2001, addressed to the government peace panel.
Moreover, as the clause is worded, it virtually guarantees that the necessary amendments to the
Constitution and the laws will eventually be put in place. Neither the GRP Peace Panel nor the
President herself is authorized to make such a guarantee. Upholding such an act would amount to

authorizing a usurpation of the constituent powers vested only in Congress, a Constitutional

Convention, or the people themselves through the process of initiative, for the only way that the
Executive can ensure the outcome of the amendment process is through an undue influence or
interference with that process.
While the MOA-AD would not amount to an international agreement or unilateral declaration
binding on the Philippines under international law, respondents' act of guaranteeing amendments
is, by itself, already a constitutional violation that renders the MOA-AD fatally defective.
WHEREFORE, respondents' motion to dismiss is DENIED. The main and intervening petitions are
GIVEN DUE COURSE and hereby GRANTED.
The Memorandum of Agreement on the Ancestral Domain Aspect of the GRP-MILF Tripoli
Agreement on Peace of 2001 is declared contrary to law and the Constitution.
SO ORDERED.

G.R. No. 145022 September 23, 2005

ARMAND NOCUM and THE PHILIPPINE DAILY INQUIRER, INC., Petitioners,
vs.
vs.
LUCIO TAN, Respondent.
DECISION
CHICO-NAZARIO, J.:
Assailed in a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure are the decision1 of the Court of Appeals dated 19 April 2000 that affirmed the
order of the Regional Trial Court (RTC) of Makati City, Branch 56, in Civil Case No. 98-2288,
dated 19 April 1999, admitting respondent Lucio Tans Amended Complaint for Damages for
the alleged malicious and defamatory imputations against him in two (2) articles of the
Philippine Daily Inquirer, and its Resolution2 dated 15 September 2000 denying petitioners
Armand Nocum and The Philippine Daily Inquirer, Inc.s motion for reconsideration.
The antecedents are summarized by the Court of Appeals.
On September 27, 1998, Lucio Tan filed a complaint against reporter Armand Nocum, Capt.
Florendo Umali, ALPAP and Inquirer with the Regional Trial Court of Makati, docketed
as Civil Case No. 98-2288,seeking moral and exemplary damages for the alleged malicious
and defamatory imputations contained in a news article.
INQUIRER and NOCUM filed their joint answer, dated October 27, 1998, wherein they alleged
that: (1) the complaint failed to state a cause of action; (2) the defamatory statements alleged
in the complaint were general conclusions without factual premises; (3) the questioned news

report constituted fair and true report on the matters of public interest concerning a public
figure and therefore, was privileged in nature; and (4) malice on their part was negated by the
publication in the same article of plaintiffs or PALs side of the dispute with the pilots union.
ALPAP and UMALI likewise filed their joint answer, dated October 31, 1998, and alleged
therein that: (1) the complaint stated no cause of action; (2) venue was improperly laid; and
(3) plaintiff Lucio Tan was not a real party in interest. It appeared that the complaint failed to
state the residence of the complainant at the time of the alleged commission of the offense
and the place where the libelous article was printed and first published.
Thus, the Regional Trial Court of Makati issued an Order dated February 10, 1999,
dismissing the complaint without prejudice on the ground of improper venue.
Aggrieved by the dismissal of the complaint, respondent Lucio Tan filed an Omnibus Motion
dated February 24, 1999, seeking reconsideration of the dismissal and admission of the
amended complaint. Inpar. 2.01.1 of the amended complaint, it is alleged that "This article
was printed and first published in the City of Makati" (p. 53, Rollo, CA-G.R. SP No. 55192), and
in par. 2.04.1, that "This caricature was printed and first published in the City of Makati" (p.
55, id.).
The lower court, after having the case dismissed for improper venue, admitted the amended
complaint and deemed set aside the previous order of dismissal, supra, stating, inter alia,
that:
"The mistake or deficiency in the original complaint appears now to have been cured in the
Amended Complaint which can still be properly admitted, pursuant to Rule 10 of the 1997
Rules of Civil Procedure, inasmuch as the Order of dismissal is not yet final. Besides, there is
no substantial amendment in the Amended Complaint which would affect the defendants
defenses and their Answers. The Amendment is merely formal, contrary to the contention of
the defendants that it is substantial."
Dissatisfied, petitioners, together with defendants Capt. Florendo Umali and the Airline
Pilots Association of the Philippines, Inc. (ALPAP), appealed the RTC decision to the Court of
Appeals. Two petitions for certiorari were filed, one filed by petitioners which was docketed
as CA-G.R. SP No. 55192, and the other by defendants Umali and ALPAP which was docketed
as CA-G.R. SP No. 54894. The two petitions were consolidated.
On 19 April 2000, the Court of Appeals rendered its decision the dispositive portion of which
reads:
WHEREFORE, premises considered, the petition is hereby DENIED DUE COURSE and
DISMISSED for lack of merit. The Order of the court a quo is hereby AFFIRMED.
The motions for reconsideration filed by petitioners and by defendants Umali and ALPAP
were likewise denied in a resolution dated 15 September 2000.
Both petitioners and defendants Umali and ALPAP appealed to this Court. Under
consideration is the petition for review filed by petitioners.

On 11 December 2000, the Court required respondent Tan to comment on the petition filed
by petitioners.3
Respondent filed his comment on 22 January 20014 to which petitioners filed a reply on 26
April 2001.5
In a Manifestation filed on 19 February 2001, respondent stated that the petition6 filed by
defendants Umali and ALPAP has already been denied by the Court in a resolution dated 17
January 2001.7
On 20 August 2003, the Court resolved to give due course to the petition and required the
parties to submit their respective memoranda within thirty (30) days from notice.8 Both
petitioners and respondent complied.9
Petitioners assigned the following as errors:
A. THE COURT OF APPEALS ERRED IN RULING (1) THAT THE LOWER COURT HAD
JURISDICTION OVER THE CASE (ON THE BASIS OF THE ORIGINAL COMPLAINT)
NOTWITHSTANDING THE FACT THAT THE LOWER COURT HAD EARLIER DISMISSED THE
ORIGINAL COMPLAINT FOR ITS FAILURE TO CONFER JURISDICTION UPON THJE COURT; AND
(2) THAT THE AMENDED COMPLAINT WAS PROPERLY ALLOWED OR ADMITTED BECAUSE
THE LOWER COURT WAS "NEVER DIVESTED" OF JURISDICTION OVER THE CASE;
B. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ORIGINAL COMPLAINT OF
RESPONDENT WAS AMENDED PURPOSELY TO CONFER UPON THE LOWER COURT
JURISDICTION OVER THE CASE.10
Petitioners state that Article 360 of the Revised Penal Code vests jurisdiction over all civil
and criminal complaints for libel on the RTC of the place: (1) where the libelous article was
printed and first published; or (2) where the complainant, if a private person, resides; or (3)
where the complainant, if a public official, holds office. They argue that since the original
complaint only contained the office address of respondent and not the latters actual
residence or the place where the allegedly offending news reports were printed and first
published, the original complaint, by reason of the deficiencies in its allegations, failed to
confer jurisdiction on the lower court.
The question to be resolved is: Did the lower court acquire jurisdiction over the civil case
upon the filing of the original complaint for damages?
We rule in the affirmative.
It is settled that jurisdiction is conferred by law based on the facts alleged in the
complaint since the latter comprises a concise statement of the ultimate facts constituting
the plaintiff's causes of action.11In the case at bar, after examining the original complaint, we
find that the RTC acquired jurisdiction over the case when the case was filed before it. From
the allegations thereof, respondents cause of action is for damages arising from libel, the
jurisdiction of which is vested with the RTC. Article 360 of the Revised Penal Code provides
that it is a Court of First Instance12 that is specifically designated to try a libel case.13

Petitioners are confusing jurisdiction with venue. A former colleague, the Hon. Florenz D.
Regalado,14differentiated jurisdiction and venue as follows: (a) Jurisdiction is the authority
to hear and determine a case; venue is the place where the case is to be heard or tried; (b)
Jurisdiction is a matter of substantive law; venue, of procedural law; (c) Jurisdiction
establishes a relation between the court and the subject matter; venue, a relation between
plaintiff and defendant, or petitioner and respondent; and, (d) Jurisdiction is fixed by law
and cannot be conferred by the parties; venue may be conferred by the act or agreement of
the parties.
In the case at bar, the additional allegations in the Amended Complaint that the article and
the caricature were printed and first published in the City of Makati referred only to the
question of venue and not jurisdiction. These additional allegations would neither confer
jurisdiction on the RTC nor would respondents failure to include the same in the original
complaint divest the lower court of its jurisdiction over the case. Respondents failure to
allege these allegations gave the lower court the power, upon motion by a party, to dismiss
the complaint on the ground that venue was not properly laid.
In Laquian v. Baltazar,15 this Court construed the term "jurisdiction" in Article 360 of the
Revised Penal Code as referring to the place where actions for libel shall be filed or "venue."
In Escribano v. Avila,16 pursuant to Republic Act No. 4363,17 we laid down the following rules
on the venue of the criminal and civil actions in written defamations.
1. General rule: The action may be filed in the Court of First Instance of the province or city
where the libelous article is printed and first published or where any of the offended parties
actually resides at the time of the commission of the offense.
2. If the offended party is a public officer with office in Manila at the time the offense was
committed, the venue is Manila or the city or province where the libelous article is printed
and first published.
3. Where an offended party is a public official with office outside of Manila, the venue is the
province or the city where he held office at the time of the commission of the offense or
where the libelous article is printed and first published.
4. If an offended party is a private person, the venue is his place of residence at the time of
the commission of the offense or where the libelous article is printed and first published.
The common feature of the foregoing rules is that whether the offended party is a public
officer or a private person, he has always the option to file the action in the Court of First
Instance of the province or city where the libelous article is printed or first published.
We further restated18 the rules on venue in Article 360 as follows:
1. Whether the offended party is a public official or a private person, the criminal action may
be filed in the Court of First Instance of the province or city where the libelous article is
printed and first published.

2. If the offended party is a private individual, the criminal action may also be filed in the
Court of First Instance of the province where he actually resided at the time of the
commission of the offense.
3. If the offended party is a public officer whose office is in Manila at the time of the
commission of the offense, the action may be filed in the Court of First Instance of Manila.
4. If the offended party is a public officer holding office outside of Manila, the action may be
filed in the Court of First Instance of the province or city where he held office at the time of
the commission of the offense.
We fully agree with the Court of Appeals when it ruled:
We note that the amended complaint or amendment to the complaint was not intended to
vest jurisdiction to the lower court, where originally it had none. The amendment was
merely to establish the proper venue for the action. It is a well-established rule that venue
has nothing to do with jurisdiction, except in criminal actions. Assuming that venue were
properly laid in the court where the action was instituted, that would be procedural, not a
jurisdictional impediment. In fact, in civil cases, venue may be waived.
Consequently, by dismissing the case on the ground of improper venue, the lower court had
jurisdiction over the case. Apparently, the herein petitioners recognized this jurisdiction by
filing their answers to the complaint, albeit, questioning the propriety of venue, instead of a
motion to dismiss.
...
We so hold that dismissal of the complaint by the lower court was proper considering that
the complaint, indeed, on its face, failed to allege neither the residence of the complainant
nor the place where the libelous article was printed and first published. Nevertheless, before
the finality of the dismissal, the same may still be amended as in fact the amended complaint
was admitted, in view of the court a quosjurisdiction, of which it was never divested. In so
doing, the court acted properly and without any grave abuse of discretion.19
It is elementary that objections to venue in CIVIL ACTIONS arising from libel may be waived
since they do not involve a question of jurisdiction. The laying of venue is procedural rather
than substantive, relating as it does to jurisdiction of the court over the person rather than
the subject matter. Venue relates to trial and not to jurisdiction.20 It is a procedural, not a
jurisdictional, matter. It relates to the place of trial or geographical location in which an
action or proceeding should be brought and not to the jurisdiction of the court.21 It is meant
to provide convenience to the parties, rather than restrict their access to the courts as it
relates to the place of trial.22 In contrast, in criminal actions, it is fundamental that venue is
jurisdictional it being an essential element of jurisdiction.23
Petitioners argument that the lower court has no jurisdiction over the case because
respondent failed to allege the place where the libelous articles were printed and first
published would have been tenable if the case filed were a criminal case. The failure of the
original complaint to contain such information would be fatal because this fact involves the

issue of venue which goes into the territorial jurisdiction of the court. This is not to be
because the case before us is a civil action where venue is not jurisdictional.
The cases24 cited by petitioners are not applicable here. These cases involve amendments on
complaints that confer jurisdiction on courts over which they originally had none. This is not
true in the case at bar. As discussed above, the RTC acquired jurisdiction over the subject
matter upon the filing of the original complaint. It did not lose jurisdiction over the same
when it dismissed it on the ground of improper venue. The amendment merely laid down
the proper venue of the case.
WHEREFORE, the foregoing considered, the decision of the Court of Appeals dated 19 April
2000 is AFFIRMED in toto. No costs.
SO ORDERED.

G.R. No. 74854 April 2, 1991

JESUS DACOYCOY, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ANTONIO V. BENEDICTO, Executive Judge,
Regional Trial Court, Branch LXXI, Antipolo, Rizal, and RUFINO DE GUZMAN, respondents.
Ramon V. Sison for petitioner.
Public Attorney's Office for private respondent.

FERNAN, C.J.:p
May the trial court motu proprio dismiss a complaint on the ground of improper venue? This is the
issue confronting the Court in the case at bar.
On March 22, 1983, petitioner Jesus Dacoycoy, a resident of Balanti, Cainta, Rizal, filed before the
Regional Trial Court, Branch LXXI, Antipolo, Rizal, a complaint against private respondent Rufino de
Guzman praying for the annulment of two (2) deeds of sale involving a parcel of riceland situated in
Barrio Estanza, Lingayen, Pangasinan, the surrender of the produce thereof and damages for
private respondent's refusal to have said deeds of sale set aside upon petitioner's demand.
On May 25, 1983, before summons could be served on private respondent as defendant therein, the
RTC Executive Judge issued an order requiring counsel for petitioner to confer with respondent
trial judge on the matter of venue. After said conference, the trial court dismissed the complaint on

the ground of improper venue. It found, based on the allegations of the complaint, that petitioner's
action is a real action as it sought not only the annulment of the aforestated deeds of sale but also
the recovery of ownership of the subject parcel of riceland located in Estanza, Lingayen,
Pangasinan, which is outside the territorial jurisdiction of the trial court.
Petitioner appealed to the Intermediate Appellate Court, now Court of Appeals, which in its decision
of April 11, 1986, 1 affirmed the order of dismissal of his complaint.
In this petition for review, petitioner faults the appellate court in affirming what he calls an equally
erroneous finding of the trial court that the venue was improperly laid when the defendant, now
private respondent, has not even answered the complaint nor waived the venue. 2
Petitioner claims that the right to question the venue of an action belongs solely to the defendant
and that the court or its magistrate does not possess the authority to confront the plaintiff and tell
him that the venue was improperly laid, as venue is waivable. In other words, petitioner asserts,
without the defendant objecting that the venue was improperly laid, the trial court is powerless to
dismiss the case motu proprio.
Private respondent, on the other hand, maintains that the dismissal of petitioner's complaint is
proper because the same can "readily be assessed as (a) real action." He asserts that "every court of
justice before whom a civil case is lodged is not even obliged to wait for the defendant to raise that
venue was improperly laid. The court can take judicial notice and motu proprio dismiss a suit
clearly denominated as real action and improperly filed before it. . . . the location of the subject
parcel of land is controlling pursuant to Sec. 2, par. (a), Rule 4 of the New Rules of Court . . . 3
We grant the petition.
The motu proprio dismissal of petitioner's complaint by respondent trial court on the ground of
improper venue is plain error, obviously attributable to its inability to distinguish between
jurisdiction and venue.
Questions or issues relating to venue of actions are basically governed by Rule 4 of the Revised
Rules of Court. It is said that the laying of venue is procedural rather than substantive. It relates to
the jurisdiction of the court over the person rather than the subject matter. Provisions relating to
venue establish a relation between the plaintiff and the defendant and not between the court and
the subject matter. Venue relates to trial not to jurisdiction, touches more of the convenience of the
parties rather than the substance of the case. 4
Jurisdiction treats of the power of the court to decide a case on the merits; while venue deals on the
locality, the place where the suit may be had. 5
In Luna vs. Carandang, 6 involving an action instituted before the then Court of First Instance of
Batangas for rescission of a lease contract over a parcel of agricultural land located in Calapan,
Oriental Mindoro, which complaint said trial court dismissed for lack of jurisdiction over the leased
land, we emphasized:
(1) A Court of First Instance has jurisdiction over suits involving title to, or
possession of, real estate wherever situated in the Philippines, subject to the rules
on venue of actions (Manila Railroad Company vs. Attorney General, etc., et al., 20

Phil. 523; Central Azucarera de Tarlac vs. De Leon, et al., 56 Phil. 169; Navarro vs.
Aguila, et al., 66 Phil. 604; Lim Cay, et al. vs. Del Rosario, etc., et al., 55 Phil. 692);
(2) Rule 4, Section 2, of the Rules of Court requiring that an action involving real
property shall be brought in the Court of First Instance of the province where the
land lies is a rule on venue of actions, which may be waived expressly or by
implication.
In the instant case, even granting for a moment that the action of petitioner is a real action,
respondent trial court would still have jurisdiction over the case, it being a regional trial court
vested with the exclusive original jurisdiction over "all civil actions which involve the title to, or
possession of, real property, or any interest therein . . ." in accordance with Section 19 (2) of Batas
Pambansa Blg. 129. With respect to the parties, there is no dispute that it acquired jurisdiction over
the plaintiff Jesus Dacoycoy, now petitioner, the moment he filed his complaint for annulment and
damages. Respondent trial court could have acquired jurisdiction over the defendant, now private
respondent, either by his voluntary appearance in court and his submission to its authority, or by
the coercive power of legal process exercised over his person. 7
Although petitioner contends that on April 28, 1963, he requested the City Sheriff of Olongapo City
or his deputy to serve the summons on defendant Rufino de Guzman at his residence at 117 Irving
St., Tapinac, Olongapo City, 8 it does not appear that said service had been properly effected or that
private respondent had appeared voluntarily in court 9 or filed his answer to the complaint. 10 At
this stage, respondent trial court should have required petitioner to exhaust the various alternative
modes of service of summons under Rule 14 of the Rules of Court, i.e., personal service under
Section 7, substituted service under Section 8, or service by publication under Section 16 when the
address of the defendant is unknown and cannot be ascertained by diligent inquiry.
Dismissing the complaint on the ground of improper venue is certainly not the appropriate course
of action at this stage of the proceeding, particularly as venue, in inferior courts as well as in the
courts of first instance (now RTC), may be waived expressly or impliedly. Where defendant fails to
challenge timely the venue in a motion to dismiss as provided by Section 4 of Rule 4 of the Rules of
Court, and allows the trial to be held and a decision to be rendered, he cannot on appeal or in a
special action be permitted to challenge belatedly the wrong venue, which is deemed waived. 11
Thus, unless and until the defendant objects to the venue in a motion to dismiss, the venue cannot
be truly said to have been improperly laid, as for all practical intents and purposes, the venue,
though technically wrong, may be acceptable to the parties for whose convenience the rules on
venue had been devised. The trial court cannot pre-empt the defendant's prerogative to object to
the improper laying of the venue by motu proprio dismissing the case.
Indeed, it was grossly erroneous for the trial court to have taken a procedural short-cut by
dismissing motu proprio the complaint on the ground of improper venue without first allowing the
procedure outlined in the Rules of Court to take its proper course. Although we are for the speedy
and expeditious resolution of cases, justice and fairness take primary importance. The ends of
justice require that respondent trial court faithfully adhere to the rules of procedure to afford not
only the defendant, but the plaintiff as well, the right to be heard on his cause.
WHEREFORE, in view of the foregoing, the decision of the Intermediate Appellate Court, now Court
of Appeals, dated April 11, 1986, is hereby nullified and set aside. The complaint filed by petitioner

before the Regional Trial Court of Antipolo, Branch LXXI is revived and reinstated. Respondent
court is enjoined to proceed therein in accordance with law.
SO ORDERED.

G.R. Nos. 159669 & 163521

March 12, 2007

UNITED OVERSEAS BANK PHILS. (formerly WESTMONT BANK), Petitioner,

vs.
ROSEMOORE MINING & DEVELOPMENT CORP. and DRA. LOURDES PASCUAL, Respondents.
DECISION
TINGA, J.:
We resolve these two consolidated cases, which though with distinct courts of origin, pertain to
issues stemming from the same loan transaction.
The antecedent facts follow.
Respondent Rosemoor Mining and Development Corporation (Rosemoor), a Philippine mining
corporation with offices at Quezon City, applied for and was granted by petitioner Westmont
Bank1 (Bank) a credit facility in the total amount of P80 million consisting of P50,000,000.00 as
long term loan and P30,000,000.00 as revolving credit line.2
To secure the credit facility, a lone real estate mortgage agreement was executed by Rosemoor and
Dr. Lourdes Pascual (Dr. Pascual), Rosemoors president, as mortgagors in favor of the Bank as
mortgagee in the City of Manila.3 The agreement, however, covered six (6) parcels of land located in
San Miguel, Bulacan4 (Bulacan properties), all registered under the name of Rosemoor,5 and two (2)
parcels of land6 situated in Gapan, Nueva Ecija (Nueva Ecija properties), owned and registered
under the name of Dr. Pascual.7
Rosemoor subsequently opened with the Bank four (4) irrevocable Letters of Credit (LCs) totaling
US$1,943,508.11.8 To cover payments by the Bank under the LCs, Rosemoor proceeded to draw
against its credit facility and thereafter executed promissory notes amounting collectively
to P49,862,682.50.9 Two (2) other promissory notes were also executed by Rosemoor in the
amounts of P10,000,000.00 and P3,500,000.00, respectively, to be drawn from its revolving credit
line.10
Rosemoor defaulted in the payment of its various drawings under the LCs and promissory notes. In
view of the default, the Bank caused the extra-judicial foreclosure of the Nueva Ecija properties on
22 May 1998 and the Bulacan properties on 10 August 1998. The Bank was the highest bidder on
both occasions.11

On 8 October 1999, the Bank caused the annotation of the Notarial Certificate of Sale covering the
Nueva Ecija properties on the certificates of title concerned. Later, on 16 March 2001, the Notarial
Certificate of Sale covering the Bulacan properties was annotated on the certificates of title of said
properties.12
The foregoing facts led to Rosemoors filing of separate complaints against the Bank, one before the
Regional Trial Court of Manila (Manila RTC) and the other before the Regional Trial Court of
Malolos, Bulacan (Malolos RTC).
The Manila Case (G.R. No. 163521)
On 5 August 1998, Rosemoor and Dr. Pascual filed a Complaint, originally captioned as one for
"Damages, Accounting and Release of Balance of Loan and Machinery and for Injunction" before the
Manila RTC.13Impleaded as defendants were the Bank and Notary Public Jose Sineneng, whose
office was used to foreclose the mortgage.14 The complaint was twice amended, the caption
eventually reflecting an action for "Accounting, Specific Performance and Damages."15 Through the
amendments, Pascual was dropped as a plaintiff while several officers of the Bank were included as
defendants.16
The Bank moved for the dismissal of the original and amended complaints on the ground that the
venue had been improperly laid.17 The motion was denied by the trial court through an Omnibus
Resolution dated 24 January 2000.18
Rosemoors prayer in the Second Amended Complaint, which was filed in November of 1999, reads
as follows:
WHEREFORE, plaintiff Rosemoor Mining & Development Corporation respectfully prays that, after
trial of the issues, this court promulgate judgment
1. Directing Westmont to render an accounting of the loan account of Rosemoor under the
Long Term Loan Facility and the Revolving Credit Line at least up to the dates of foreclosure
of Rosemoors mortgaged properties on May 22, 1998 and August 18, 1998, showing among
others (a) the sums of money paid by Rosemoor or otherwise debited from its deposit
account in payment of the loans it had obtained from Westmont to cover the cost of the
machinery to be imported under the Unpaid LCs and under LC No. 97-058 for the tiling
plant, as well as for working capital, and (b) all interests, penalties and charges imposed on
the loans pertaining to the Unpaid LCs and LC No. 97-058 and for which Westmont had
foreclosed Rosemoors and Dra. Pascuals real estate mortgage; (c) the amount of import
and customs duties, demurrage, storage and other fees which Rosemoor had paid or which
was otherwise debited from Rosemoors deposit account, in connection with the
importation of the tiling plant and as a consequence of the non-release thereof by
Westmont;
2. Ordering all the defendants jointly and severally to pay to Rosemoor, by way of actual
damages, the dollar equivalent of the amounts in (1) (a), (b) and (c) at the exchange rate
prevailing at the time of the opening of the LCs;
3. Ordering defendants jointly and severally to pay to Rosemoor actual damages for
operational losses suffered by Rosemoor due to its failure to use the tiling plaint which

Westmont had refused to release to Rosemoor, in such amount as may be proven at the
trial;
4. Directing the defendants jointly and severally to pay, by way of correction for the public
good, exemplary damages in the amount of P 500,000.00 each;
5. Ordering defendants jointly and severally to indemnify Rosemoor in the sum
of P350,000.00, representing attorneys fees and litigation expenses incurred by Rosemoor
for the protection and enforcement of its rights and interests.
Plaintiff prays for further and other relief as may be just and equitable under the circumstances. 19
On 15 August 2002, the Bank filed another motion to dismiss the Second Amended Complaint on
the ground of forum-shopping since, according to it, Rosemoor had filed another petition earlier on
11 March 2002 before the Malolos RTC.20 The Bank contended that as between the action before the
Manila RTC and the petition before the Malolos RTC, there is identity of parties, rights asserted, and
reliefs prayed for, the relief being founded on the same set of facts. The Bank further claimed that
any judgment that may be rendered in either case will amount tores judicata in the other
case.21 Still, the
Manila RTC denied the motion to dismiss.22 It also denied the
Banks motion for reconsideration of the order of denial.23
The Bank challenged the Manila RTCs denial of the Banks second motion to dismiss before the
Court of Appeals, through a petition for certiorari. The appellate court dismissed the petition in a
Decision dated 26 February 2004.24 The Bank filed a motion for reconsideration which, however,
was denied through a Resolution dated 30 April 2004.25
In the Petition for Review on Certiorari in G.R. No. 163521, the Bank argues that the Court of
Appeals erred in holding that no forum-shopping attended the actions brought by Rosemoor.26
The Malolos Case (G.R. No. 159669)
After the complaint with the Manila RTC had been lodged, on 11 March 2002, Rosemoor and Dr.
Pascual filed another action against the Bank, this time before the Malolos RTC. Impleaded together
with the Bank as respondent was the Register of Deeds for the Province of Bulacan in the Petition
for Injunction with Damages,
with Urgent Prayer for Temporary Restraining Order and/or Preliminary Injunction.27
In the Malolos case, Rosemoor and Dr. Pascual alleged that the redemption period for the Bulacan
properties would expire on 16 March 2002. They claimed that the threatened consolidation of titles
by the Bank is illegal, stressing that the foreclosure of the real estate mortgage by the Bank was
fraudulent and without basis,28 as the Bank had made them sign two blank forms of Real Estate
Mortgage and several promissory notes also in blank forms. It appeared later, according to
Rosemoor and Dr. Pascual, that the two Real Estate Mortgage blank forms were made as security
for two loans, one for P80 million and the other for P48 million, when the total approved loan was

only for P80 million. The Bank later released only the amount of P10 million out of the P30 million
revolving credit line, to the prejudice of Rosemoor, they added.29
The Petitions prayer reads as follows:
WHEREFORE, premises considered, it is most respectfully prayed that this Honorable Court
1. Issue ex-parte a temporary restraining order before the matter could be heard on notice
to restrain and enjoin respondent BANK from proceeding with its threatened consolidation
of its titles over the subject properties of petitioner Rosemoor in San Miguel, Bulacan
covered by TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT 34569 (T-222448) on
March 16, 2002 or at any time thereafter; that the respondent Register of Deeds for the
Province of Bulacan be enjoined and restrained from registering any document(s)
submitted and/or to be submitted by respondent BANK consolidating its titles over the
above-named properties of petitioner Rosemoor in San Miguel, Bulacan; and likewise, that
the Register of Deeds for the province of Bulacan be restrained and enjoined from canceling
the titles of Rosemoor over its properties, namely, TCT Nos. 42132; 42133; 42134; 42135;
42136 and RT 34569 (T-222448);
2. That after due notice, a writ of preliminary injunction be issued upon the posting of a
bond in such amount as may be fixed by this Court;
3. That after due hearing and trial, judgment be rendered in favor of petitioners and against
respondent BANK
a. Permanently enjoining respondent BANK from proceeding with the consolidation
of its titles to the subject properties of Rosemoor covered by TCT Nos. 42132;
42133; 42134; 42135; 42136 and RT 34569 (T-222448); and permanently
restraining respondent Register of Deeds for the Province of Bulacan from
registering any document(s) submitted and/or to be submitted by respondent
BANK consolidating its titles over the above-named properties of petitioner
Rosemoor in San Miguel, Bulacan; and likewise, that the Register of Deeds for the
province of Bulacan be restrained and enjoined from cancelling the titles of
Rosemoor over its properties, namely, TCT Nos. 42132; 42133; 42134; 42135;
42136 and RT 34569 (T-222448);
b. Declaring the foreclosures of Real Estate Mortgages on the properties of
petitioners Rosemoor and Dra. Pascual to be null and void;
c. Recognizing the ownership in fee simple of the petitioners over their properties
above-mentioned;
d. Awarding to petitioners the damages prayed for, including attorneys fees and
costs and expenses of litigation.
Petitioners pray for such other reliefs and remedies as may be deemed just and equitable in the
premises.30

As it did before the Manila RTC, the Bank filed a motion to dismiss on 26 March 2002 on the ground
that Rosemoor had engaged in forum-shopping, adverting to the pending Manila case.31 The Bank
further alleged that Dr. Pascual has no cause of action since the properties registered in her name
are located in Nueva Ecija. The Malolos RTC denied the motion to dismiss in an Order dated 13 May
2002.32 In the same Order, the Malolos RTC directed the Bank to file its answer to the petition
within five (5) days from notice.33
Despite receipt of the Order on 21 May 2002, the Bank opted not to file its answer as it filed instead
a motion for reconsideration on 5 June 2002.34 Meanwhile, Rosemoor and Dr. Pascual moved to
declare the Bank in default for its failure to timely file its answer.35 On 10 September 2002, the
Malolos RTC issued an order denying the Banks motion for reconsideration for lack of merit and at
the same time declaring the Bank in default for failure to file its answer.36
Hence, the Bank filed a second petition for certiorari before the Court of Appeals, where it assailed
the Orders dated 13 May 2002 and 10 September 2002 of the Malolos RTC. During the pendency of
this petition for certiorari, the Malolos RTC decided the Malolos case on the merits in favor of
Rosemoor.37 The decision in the Malolos case was also appealed to the Court of Appeals.38 Based on
these developments, the appellate court considered the prayer for preliminary injunction as moot
and academic and proceeded with the resolution of the petition, by then docketed as CA-G.R. SP
No.73358, on the merits. The appellate court dismissed the petition in a Decision dated 20 June
2003.39 Undaunted, the Bank filed the petition in G.R. No. 159669 before this Court.
The two petitions before this Court have been consolidated. We find one common issue in G.R. No.
159669 and G.R. No. 163521 whether Rosemoor committed forum-shopping in filing the two
cases against the Bank. The other issues for resolution were raised in G.R. No. 159669, pertaining as
they do to the orders issued by the Malolos RTC. These issues are whether the action to invalidate
the foreclosure sale was properly laid with the Malolos RTC even as regards the Nueva Ecija
properties; whether it was proper for the Malolos RTC to declare the Bank in default; and whether
it was proper for the Malolos RTC to deny the Banks motion to dismiss through a minute
resolution.40
Forum-Shopping
The central issue in these consolidated cases is whether Rosemoor committed forum-shopping in
filing the Malolos case during the pendency of the Manila case.
The essence of forum-shopping is the filing of multiple suits involving the same parties for the same
cause of action, either simultaneously or successively, for the purpose of obtaining a favorable
judgment.41 The elements of forum-shopping are: (a) identity of parties, or at least such parties as
represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for,
the reliefs being founded on the same facts; and (c) the identity with respect to the two preceding
particulars in the two cases is such that any judgment rendered in the pending cases, regardless of
which party is successful, amount to res judicata in the other case.42
As to the existence of identity of parties, several bank officers and employees impleaded in the
Amended Complaint in the Manila case were not included in the Malolos case. These bank officers
and employees were sued in Manila in their personal capacity. A finding of negligence or bad faith
in their participation in the preparation and execution of the loan agreement would render them
personally liable. Dr. Pascual, on the other hand, was included as petitioner only in the Malolos case

because it involved properties registered in her name. As correctly pointed out by the Court of
Appeals, Dr. Pascual is a real party-in-interest in the Malolos case because she stood to benefit or
suffer from the judgment in the suit. Dr. Pascual, however, was not included as plaintiff in the
Manila case because her interest therein was not personal but merely in her capacity as officer of
Rosemoor.
As regards the identity of rights asserted and reliefs prayed for, the main contention of Rosemoor in
the Manila case is that the Bank had failed to deliver the full amount of the loan, as a consequence of
which Rosemoor demanded the remittance of the unreleased portion of the loan and payment of
damages consequent thereto.43In contrast, the Malolos case was filed for the purpose of restraining
the Bank from proceeding with the consolidation of the titles over the foreclosed Bulacan
properties because the loan secured by the mortgage had not yet become due and
demandable.44 While the right asserted in the Manila case is to receive the proceeds of the loan, the
right sought in the Malolos case is to restrain the foreclosure of the properties mortgaged to secure
a loan that was not yet due.
Moreover, the Malolos case is an action to annul the foreclosure sale that is necessarily an action
affecting the title of the property sold.45 It is therefore a real action which should be commenced
and tried in the province where the property or part thereof lies.46 The Manila case, on the other
hand, is a personal action47 involving as it does the enforcement of a contract between Rosemoor,
whose office is in Quezon City, and the Bank, whose principal office is in Binondo,
Manila.48 Personal actions may be commenced and tried where the plaintiff or any of the principal
plaintiffs resides, or where the defendants or any of the principal defendants resides, at the election
of the plaintiff.49
It was subsequent to the filing of the Manila case that Rosemoor and Dr. Pascual saw the need to
secure a writ of injunction because the consolidation of the titles to the mortgaged properties in
favor of the Bank was in the offing. But then, this action can only be commenced where the
properties, or a portion thereof, is located. Otherwise, the petition for injunction would be
dismissed for improper venue. Rosemoor, therefore, was warranted in filing the Malolos case and
cannot in turn be accused of forum-shopping.
Clearly, with the foregoing premises, it cannot be said that respondents committed forum-shopping.
Action to nullify foreclosure sale of mortgaged properties in Bulacan and Nueva Ecija before the
Malolos RTC
The Bank challenges the Malolos RTCs jurisdiction over the action to nullify the foreclosure sale of
the Nueva Ecija properties along with the Bulacan properties. This question is actually a question of
venue and not of jurisdiction,50 which if improperly laid, could lead to the dismissal of the case.51
The rule on venue of real actions is provided in Section 1, Rule 4 of the 1997 Rules of Civil
Procedure, which reads in part:
Section 1. Venue of Real Actions. Actions affecting title to or possession of real property, or interest
therein, shall be commenced and tried in the proper court which has jurisdiction over the area
wherein the real property involved, or a portion thereof, is situated.
xxx

The venue of the action for the nullification of the foreclosure sale is properly laid with the Malolos
RTC although two of the properties together with the Bulacan properties are situated in Nueva
Ecija. Following the above-quoted provision of the Rules of Court, the venue of real actions affecting
properties found in different provinces
is determined by the singularity or plurality of the transactions involving said parcels of land.
Where said parcels are the object of one and the same transaction, the venue is in the court of any
of the provinces wherein a parcel of land is situated.52
Ironically, the Bank itself correctly summarized the applicable jurisprudential rule in one of the
pleadings before the Court.53 Yet the Bank itself has provided the noose on which it would be hung.
Resorting to deliberate misrepresentation, the Bank stated in the same pleading that "the Bulacan
and Nueva Ecija [p]roperties were not the subject of one single real estate mortgage
contract."54
In the present case, there is only one proceeding sought to be nullified and that is the extra-judicial
mortgage foreclosure sale. And there is only one initial transaction which served as the basis of the
foreclosure sale and that is the mortgage contract. Indeed, Rosemoor, through Dr. Pascual, executed
a lone mortgage contract where it undertook to "mortgage the land/real property situated in
Bulacan and Nueva Ecija," with the list of mortgaged properties annexed thereto revealing six (6)
properties in Bulacan and two (2) properties in Nueva Ecija subject of the mortgage.
This apparent deliberate misrepresentation cannot simply pass without action. The real estate
mortgage form supplied to Rosemoor is the Banks standard pre-printed form. Yet the Bank
perpetrated the misrepresentation. Blame must be placed on its doorstep. But as the Banks
pleading was obviously prepared by its counsel, the latter should also share the blame. A lawyer
shall not do any falsehood, nor consent to the doing of any in court; nor shall he mislead, or allow
the Court to be misled by any artifice.55 Both the Banks president and counsel should be made to
explain why they should not be sanctioned for contempt of court.
Propriety of Default Order
The Court of Appeals did not touch upon the soundness or unsoundness of the order of default
although it is one of the orders assailed by the Bank. However, the silence of the appellate court on
the issue does not improve the legal situation of the Bank.
To recall, the Bank filed a motion to dismiss the Malolos case. The Malolos RTC denied the motion in
an Order dated 13 May 2002.56 In the same Order, the Malolos RTC directed the Bank to file
its answer to the petition within five (5) days from the receipt of the Order.57 The Bank received a
copy of the Order on 21 May 2002. Instead of filing an answer, the Bank filed a motion for
reconsideration but only on 5 June 2002.58
The motion for reconsideration59 could not have tolled the running of the period to answer for two
reasons. One, it was filed late, nine (9) days after the due date of the answer. Two, it was a mere
rehash of the motion to dismiss; hence, pro forma in nature. Thus, the Malolos RTC did not err in
declaring the Bank in default.
Deviation from the Prescribed Content of an Order Denying a Motion to Dismiss

Finally, the Bank questions the Malolos RTCs Order dated 13 May 2002 denying its motion to
dismiss on the ground that it is contrary to law and jurisprudence because it had failed to apprise
the Bank of the legal basis for the denial.
The Bank adverts to the content requirement of an order denying a motion to dismiss prescribed by
Sec. 3, Rule 16 of the Rules of Court. The Court in Lu Ym v. Nabua60 made a thorough discussion on
the matter, to quote:
Sec. 3, Rule 16 of the Rules provides:
Sec. 3. Resolution of motion.After the hearing, the court may dismiss the action or claim, deny the
motion or order the amendment of the pleading.
The court shall not defer the resolution of the motion for the reason that the ground relied upon is
not indubitable.
In every case, the resolution shall state clearly and distinctly the reasons therefor.
xxxx
Further, it is now specifically required that the resolution on the motion shall clearly and
distinctly state the reasons therefor. This proscribes the common practice of perfunctorily
dismissing the motion for "lack of merit." Such cavalier dispositions can often pose difficulty
and misunderstanding on the part of the aggrieved party in taking recourse therefrom and
likewise on the higher court called upon to resolve the same, usually on certiorari.61
The questioned order of the trial court denying the motion to dismiss with a mere statement that
there are justiciable questions which require a full blown trial falls short of the requirement of Rule
16 set forth above. Owing to the terseness of its expressed justification, the challenged order
ironically suffers from undefined breadth which is a hallmark of imprecision. With its unspecific
and amorphous thrust, the issuance is inappropriate to the grounds detailed in the motion to
dismiss.
While the requirement to state clearly and distinctly the reasons for the trial courts resolutory
order under Sec. 3, Rule 16 of the Rules does call for a liberal interpretation, especially since
jurisprudence dictates that it is decisions on cases submitted for
decision that are subject to the stringent requirement of specificity of rulings under Sec. 1, Rule
3662 of the Rules, the trial courts order in this case leaves too much to the imagination. (Emphasis
supplied.)63
The assailed order disposed of the motion to dismiss in this wise:
xxxx
After a careful scrutiny of the grounds cited in the Motion to Dismiss and the arguments en contra
contained in the Opposition thereto and finding the Motion to Dismiss to be not well taken as
grounds cited are not applicable to the case at bar, the Court hereby DENIES the instant Motion to
Dismiss.

x x x x64
Clearly, the subject order falls short of the content requirement as expounded in Lu Ym v.
Nabua. Despite the aberration, however, the Bank was not misled, though it could have
encountered difficulties or inconvenience because of it. Comprehending, as it did, that the Malolos
RTC did not share its position that Rosemoor had engaged in forum-shopping, it went to great
lengths to impress upon the Court of
Appeals that there was indeed forum-shopping on Rosemoors part. But the appellate court did not
likewise agree with the Bank as it soundly debunked the forum-shopping charge. In fact, the same
forum-shopping argument has been fully ventilated before the Court but we are utterly
unimpressed as we made short shrift of the argument earlier on. In the ultimate analysis, therefore,
the trial courts blunder may be overlooked as it proved to be harmless.
WHEREFORE, considering the foregoing, the Decision of the Court of Appeals in G.R. 163521 dated
26 February 2004 and in G.R No. 159669 dated 20 June 2003 are AFFIRMED. Costs against
petitioner. Petitioner, United Overseas Bank, Phils. and its counsel, Siguion Reyna Montecillo &
Ongsiako Law Offices, are given ten (10) days from notice to EXPLAIN why they should not be held
in contempt of court for making a misrepresentation before the Court as adverted to in this
Decision.
SO ORDERED.

G.R. No. L-27033

October 31, 1969

POLYTRADE CORPORATION, plaintiff-appellee,

vs.
VICTORIANO BLANCO, defendant-appellant.
Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.
Isidro T. Almeda and Mario T. Banzuela for defendant-appellant.
SANCHEZ, J.:
Suit before the Court of First Instance of Bulacan on four causes of action to recover the purchase
price of rawhide delivered by plaintiff to defendant.1 Plaintiff corporation has its principal office
and place of business in Makati, Rizal. Defendant is a resident of Meycauayan, Bulacan. Defendant
moved to dismiss upon the ground of improper venue. He claims that by contract suit may only be
lodged in the courts of Manila. The Bulacan court overruled him. He did not answer the complaint.
In consequence, a default judgment was rendered against him on September 21, 1966, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant
ordering defendant to pay plaintiff the following amounts:

First Cause of Action

P60,845.67, with interest thereon at 1% a month from May 9, 1965 until the
full amount is paid.

Second Cause of
Action

P51,952.55, with interest thereon at 1% a month from March 30, 1965 until
the full amount is paid.

Third Cause of
Action

P53,973.07, with interest thereon at 1% a month from July 3, 1965 until the
full amount is paid.

Fourth Cause of
Action

P41,075.22, with interest thereon at 1% a month2 until the full amount is

paid.

In addition, defendant shall pay plaintiff attorney's fees amounting to 25% of the principal
amount due in each cause of action, and the costs of the suit. The amount of P400.00 shall be
deducted from the total amount due plaintiff in accordance with this judgment.
Defendant appealed.
1. The forefront question is whether or not venue was properly laid in the province of Bulacan
where defendant is a resident.
Section 2 (b), Rule 4 of the Rules of Court on venue of personal actions triable by courts of first
instance and this is one provides that such "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." Qualifying this provision in Section 3 of the same
Rule which states that venue may be stipulated by written agreement "By written agreement of
the parties the venue of an action may be changed or transferred from one province to another."
Defendant places his case upon Section 3 of Rule 4 just quoted. According to defendant, plaintiff and
defendant, by written contracts covering the four causes of action, stipulated that: "The parties
agree to sue and be sued in the Courts of Manila." This agreement is valid.3 Defendant says that
because of such covenant he can only be sued in the courts of Manila. We are thus called upon to
shake meaning from the terms of the agreement just quoted.
But first to the facts. No such stipulation appears in the contracts covering the first two causes of
action. The general rule set forth in Section 2 (b), Rule 4, governs, and as to said two causes of
action, venue was properly laid in Bulacan, the province of defendant's residence.
The stipulation adverted to is only found in the agreements covering the third and fourth causes of
action. An accurate reading, however, of the stipulation, "The parties agree to sue and be sued in the
Courts of Manila," does not preclude the filing of suits in the residence of plaintiff or defendant. The
plain meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive
words which would indicate that Manila and Manila alone is the venue are totally absent therefrom.
We cannot read into that clause that plaintiff and defendant bound themselves to file suits with
respect to the last two transactions in question only or exclusively in Manila. For, that agreement
did not change or transfer venue. It simply is permissive. The parties solely agreed to add the courts
of Manila as tribunals to which they may resort. They did not waive their right to pursue remedy in
the courts specifically mentioned in Section 2(b) of Rule 4. Renuntiatio non praesumitur.

Illuminating on this point is Engel vs. Shubert Theatrical Co., 151 N.Y.S. 593, 594. And this, became
there the stipulation as to venue is along lines similar to the present. Said stipulation reads: "In case
of dispute, both contracting parties agree to submit to the jurisdiction of the Vienna courts." And
the ruling is: "By the clause in question the parties do not agree to submit their disputes to the
jurisdiction of the Viennese court, and to those courts only. There is nothing exclusive in the
language used. They do agree to submit to the Viennese jurisdiction, but they say not a word in
restriction of the jurisdiction of courts elsewhere; and whatever may be said on the subject of the
legality of contracts to submit controversies to courts of certain jurisdictions exclusively, it is
entirely plain that such agreements should be strictly construed, and should not be extended by
implication."
Venue here was properly laid.
2. Defendant next challenges the lower court's grant to plaintiff of interest at the rate of one per
centum per month. Defendant says that no such stipulation as to right of interest appears in the
sales confirmation orders which provided: "TERMS 60 days after delivery with interest accruing
on postdated cheques beyond 30 days." The flaw in this argument lies in that the interest and the
rate thereof are expressly covenanted in the covering trust receipts executed by defendant in favor
of plaintiff, as follows: "All obligations of the undersigned under this agreement of trust shall bear
interest at the rate of one per centum (1%) per month from the date due until paid."
On this score, we find no error.
3. Defendant protests the award of attorneys' fees which totals P51,961.63, i.e., 25% of the total
principal indebtedness of P207,846.51 (exclusive of interest). Defendant's thesis is that the
foregoing sum is "exorbitant and unconscionable."
To be borne in mind is that the attorneys' fees here provided is not, strictly speaking, the attorneys'
fees recoverable as between attorney and client spoken of and regulated by the Rules of Court.
Rather, the attorneys' fees here are in the nature of liquidated damages and the stipulation therefor
is aptly called a penal clause.4 It has been said that so long as such stipulation does not contravene
law, morals, or public order, it is strictly binding upon defendant.5 The attorneys' fees so provided
are awarded in favor of the litigant, not his counsel. It is the litigant, not counsel, who is the
judgment creditor entitled to enforce the judgment by execution.6
The governing law then is Article 2227 of the Civil Code, viz.: "Liquidated damages, whether
intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or
unconscionable." For this reason, we do not really have to strictly view the reasonableness of the
attorneys' fees in the light of such factors as the amount and character of the services rendered, the
nature and importance of the litigation, and the professional character and the social standing of
the attorney. We do concede, however, that these factors may be an aid in the determination of the
iniquity or unconscionableness of attorneys' fees as liquidated damages.
May the attorneys' fees (P51,961.63) here granted be tagged as iniquitous or unconscionable? Upon
the circumstances, our answer is in the negative. Plaintiff's lawyers concededly are of high standing.
More important is that this case should not have gone to court. It could have been easily avoided
had defendant been faithful in complying with his obligations. It is not denied that the rawhide was
converted into leather and sold by defendant. He raises no defense. In fact, he did not even answer
the complaint in the lower court, and was thus declared in default. Nor does he deny the principal

liability. Add to all these the fact that the writ of attachment issued below upon defendant's
properties yielded no more than P400 and the picture is complete. The continued maintenance by
defendant of the suit is plainly intended for delay. The attorneys' fees awarded cannot be called
iniquitous or unconscionable.
In the very recent case of Universal Motors Corporation vs. Dy Hian Tat (1969), 28 SCRA 161, 170,
we allowed attorneys' fees in the form of liquidated damages at the rate of 25% of the total amount
of the indebtedness. Here, the trial court has already reduced the attorneys' fees from the stipulated
25% "of the total amount involved, principal and interest, then unpaid" to only 25% of
the principal amount due. There is no reason why such judgment should be disturbed.
FOR THE REASON GIVEN, the appealed judgment is hereby affirmed, except that interest granted, in
reference to the fourth cause of action, should start from March 24, 1965.
Costs against defendant-appellant. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and Barredo,
JJ.,concur.

G.R. No. 125027

August 12, 2002

ANITA MANGILA, petitioner,

vs.
COURT OF APPEALS and LORETA GUINA, respondents.
CARPIO, J.:
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set aside
the Decision1of the Court of Appeals affirming the Decision2 of the Regional Trial Court, Branch 108,
Pasay City. The trial court upheld the writ of attachment and the declaration of default on petitioner
while ordering her to pay private respondent P109,376.95 plus 18 percent interest per annum, 25
percent attorneys fees and costs of suit.
The Facts
Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods and doing business
under the name and style of Seafoods Products. Private respondent Loreta Guina ("private
respondent" for brevity) is the President and General Manager of Air Swift International, a single
registered proprietorship engaged in the freight forwarding business.
Sometime in January 1988, petitioner contracted the freight forwarding services of private
respondent for shipment of petitioners products, such as crabs, prawns and assorted fishes, to
Guam (USA) where petitioner maintains an outlet. Petitioner agreed to pay private respondent cash
on delivery. Private respondents invoice stipulates a charge of 18 percent interest per annum on all

overdue accounts. In case of suit, the same invoice stipulates attorneys fees equivalent to 25
percent of the amount due plus costs of suit.3
On the first shipment, petitioner requested for seven days within which to pay private respondent.
However, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private
respondent shipping charges amounting to P109, 376.95.4
Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988, private
respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for collection of
sum of money.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not served on
petitioner. A woman found at petitioners house informed the sheriff that petitioner transferred her
residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that petitioner had left the
Philippines for Guam.5
Thus, on September 13, 1988, construing petitioners departure from the Philippines as done with
intent to defraud her creditors, private respondent filed a Motion for Preliminary Attachment. On
September 26, 1988, the trial court issued an Order of Preliminary Attachment6 against petitioner.
The following day, the trial court issued a Writ of Preliminary Attachment.
The trial court granted the request of its sheriff for assistance from their counterparts in RTC,
Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on
petitioners household help in San Fernando, Pampanga, the Notice of Levy with the Order, Affidavit
and Bond.7
On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment8 without
submitting herself to the jurisdiction of the trial court. She pointed out that up to then, she had not
been served a copy of the Complaint and the summons. Hence, petitioner claimed the court had not
acquired jurisdiction over her person.9
In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private
respondent sought and was granted a re-setting to December 9, 1988. On that date, private
respondents counsel did not appear, so the Urgent Motion to Discharge Attachment was deemed
submitted for resolution.10
The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of
petitioners counter-bond. The trial court, however, did not rule on the question of jurisdiction and
on the validity of the writ of preliminary attachment.
On December 26, 1988, private respondent applied for an alias summons, which the trial court
issued on January 19, 1989.11 It was only on January 26, 1989 that summons was finally served on
petitioner.12
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper
venue. Private respondents invoice for the freight forwarding service stipulates that "if court
litigation becomes necessary to enforce collection xxx the agreed venue for such action is Makati,
Metro Manila."13 Private respondent filed an Opposition asserting that although "Makati" appears as
the stipulated venue, the same was merely an inadvertence by the printing press whose general

manager executed an affidavit14 admitting such inadvertence. Moreover, private respondent

claimed that petitioner knew that private respondent was holding office in Pasay City and not in
Makati.15 The lower court, finding credence in private respondents assertion, denied the Motion to
Dismiss and gave petitioner five days to file her Answer. Petitioner filed a Motion for
Reconsideration but this too was denied.
Petitioner filed her Answer16 on June 16, 1989, maintaining her contention that the venue was
improperly laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m.
and requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed a
Motion to Sell Attached Properties but the trial court denied the motion.
On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989 to
August 24, 1989 at 8:30 a.m..
On August 24, 1989, the day of the pre-trial, the trial court issued an Order17 terminating the pretrial and allowing the private respondent to present evidence ex-parte on September 12, 1989 at
8:30 a.m.. The Order stated that when the case was called for pre-trial at 8:31 a.m., only the counsel
for private respondent appeared. Upon the trial courts second call 20 minutes later, petitioners
counsel was still nowhere to be found. Thus, upon motion of private respondent, the pre-trial was
considered terminated.
On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating
the pre-trial. Petitioner explained that her counsel arrived 5 minutes after the second call, as shown
by the transcript of stenographic notes, and was late because of heavy traffic. Petitioner claims that
the lower court erred in allowing private respondent to present evidence ex-parte since there was
no Order considering the petitioner as in default. Petitioner contends that the Order of August 24,
1989 did not state that petitioner was declared as in default but still the court allowed private
respondent to present evidence ex-parte.18
On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the
presentation of private respondents evidence ex-parte on October 10, 1989.1wphi1.nt
On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of
evidence ex-parte should be suspended because there was no declaration of petitioner as in default
and petitioners counsel was not absent, but merely late.
On October 18, 1989, the trial court denied the Omnibus Motion.19
On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989,
ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent
attorneys fees and costs of suit. Private respondent filed a Motion for Execution Pending Appeal
but the trial court denied the same.
The Ruling of the Court of Appeals
On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the trial
court. The Court of Appeals upheld the validity of the issuance of the writ of attachment and

sustained the filing of the action in the RTC of Pasay. The Court of Appeals also affirmed the
declaration of default on petitioner and concluded that the trial court did not commit any reversible
error.
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied
the same in a Resolution dated May 20, 1996.
Hence, this petition.
The Issues
The issues raised by petitioner may be re-stated as follows:
I.
WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED;
II.
WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
III.
WHETHER THERE WAS IMPROPER VENUE.
IV.
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED
TO PAY P109, 376.95, PLUS ATTORNEYS FEES.20
The Ruling of the Court
Improper Issuance and Service of Writ of Attachment
Petitioner ascribes several errors to the issuance and implementation of the writ of attachment.
Among petitioners arguments are: first, there was no ground for the issuance of the writ since the
intent to defraud her creditors had not been established; second, the value of the properties levied
exceeded the value of private respondents claim. However, the crux of petitioners arguments rests
on the question of the validity of the writ of attachment. Because of failure to serve summons on her
before or simultaneously with the writs implementation, petitioner claims that the trial court had
not acquired jurisdiction over her person and thus the service of the writ is void.
As a preliminary note, a distinction should be made between issuance and implementation of the
writ of attachment. It is necessary to distinguish between the two to determine when jurisdiction
over the person of the defendant should be acquired to validly implement the writ. This distinction
is crucial in resolving whether there is merit in petitioners argument.

This Court has long settled the issue of when jurisdiction over the person of the defendant should
be acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any
time after filing the complaint, avail of the provisional remedies under the Rules of Court.
Specifically, Rule 57 on preliminary attachment speaks of the grant of the remedy "at the
commencement of the action or at any time thereafter."21 This phrase refers to the date of filing
of the complaint which is the moment that marks "the commencement of the action." The reference
plainly is to a time before summons is served on the defendant, or even before summons issues.
In Davao Light & Power Co., Inc. v. Court of Appeals,22 this Court clarified the actual time when
jurisdiction should be had:
"It goes without saying that whatever be the acts done by the Court prior to the acquisition
of jurisdiction over the person of defendant - issuance of summons, order of attachment
and writ of attachment - these do not and cannot bind and affect the defendant until
and unless jurisdiction over his person is eventually obtained by the court, either by
service on him of summons or other coercive process or his voluntary submission to the
courts authority. Hence, when the sheriff or other proper officer
commences implementation of the writ of attachment, it is essential that he serve on the
defendant not only a copy of the applicants affidavit and attachment bond, and of the order
of attachment, as explicitly required by Section 5 of Rule 57, but also
the summons addressed to said defendant as well as a copy of the complaint xxx."
(Emphasis supplied.)
Furthermore, we have held that the grant of the provisional remedy of attachment involves three
stages: first, the court issues the order granting the application; second, the writ of attachment
issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial
two stages, it is not necessary that jurisdiction over the person of the defendant be first
obtained. However, once the implementation of the writ commences, the court must have
acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and
authority to act in any manner against the defendant. Any order issuing from the Court will not bind
the defendant.23
In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and
implemented on October 28, 1988. However, the alias summons was served only on
January 26, 1989 or almost three months after the implementation of the writ of attachment.
The trial court had the authority to issue the Writ of Attachment on September 27 since a motion
for its issuance can be filed "at the commencement of the action." However, on the day the writ was
implemented, the trial court should have, previously or simultaneously with the implementation of
the writ, acquired jurisdiction over the petitioner. Yet, as was shown in the records of the case, the
summons was actually served on petitioner several months after the writ had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of summons
contemplated in Section 5 of Rule 57 provides for exceptions. Among such exceptions are "where
the summons could not be served personally or by substituted service despite diligent efforts or
where the defendant is a resident temporarily absent therefrom x x x." Private respondent asserts
that when she commenced this action, she tried to serve summons on petitioner but the latter could
not be located at her customary address in Kamuning, Quezon City or at her new address in Guagua,

Pampanga.24 Furthermore, respondent claims that petitioner was not even in Pampanga; rather, she
was in Guam purportedly on a business trip.
Private respondent never showed that she effected substituted service on petitioner after her
personal service failed. Likewise, if it were true that private respondent could not ascertain the
whereabouts of petitioner after a diligent inquiry, still she had some other recourse under the Rules
of Civil Procedure.
The rules provide for certain remedies in cases where personal service could not be effected on a
party. Section 14, Rule 14 of the Rules of Court provides that whenever the defendants
"whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of
court, be effected upon him by publication in a newspaper of general circulation x x x." Thus, if
petitioners whereabouts could not be ascertained after the sheriff had served the summons at her
given address, then respondent could have immediately asked the court for service of summons by
publication on petitioner.25
Moreover, as private respondent also claims that petitioner was abroad at the time of the service of
summons, this made petitioner a resident who is temporarily out of the country. This is the exact
situation contemplated in Section 16,26 Rule 14 of the Rules of Civil Procedure, providing for service
of summons by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to
have cured the fatal defect in the enforcement of the writ. The trial court cannot enforce such a
coercive process on petitioner without first obtaining jurisdiction over her person. The preliminary
writ of attachment must be served after or simultaneous with the service of summons on the
defendant whether by personal service, substituted service or by publication as warranted by the
circumstances of the case.27 The subsequent service of summons does not confer a retroactive
acquisition of jurisdiction over her person because the law does not allow for retroactivity of a
belated service.
Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private
respondents invoice which contains the following:
"3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic)
to 25% of the principal amount will be charged. The agreed venue for such action is Makati,
Metro Manila, Philippines."28
Based on this provision, petitioner contends that the action should have been instituted in the RTC
of Makati and to do otherwise would be a ground for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for the reason stated by
petitioner.
The Rules of Court provide that parties to an action may agree in writing on the venue on which an
action should be brought.29 However, a mere stipulation on the venue of an action is not enough to
preclude parties from bringing a case in other venues.30 The parties must be able to show that such
stipulation is exclusive. Thus, absent words that show the parties intention to restrict the filing of a

suit in a particular place, courts will allow the filing of a case in any venue, as long as jurisdictional
requirements are followed. Venue stipulations in a contract, while considered valid and
enforceable, do not as a rule supersede the general rule set forth in Rule 4 of the Revised Rules of
Court.31 In the absence of qualifying or restrictive words, they should be considered merely as an
agreement on additional forum, not as limiting venue to the specified place.32
In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no
qualifying or restrictive words in the invoice that would evince the intention of the parties that
Makati is the "only or exclusive" venue where the action could be instituted. We therefore agree
with private respondent that Makati is not the only venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is "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."33 The exception to this rule is when the parties
agree on an exclusive venue other than the places mentioned in the rules. But, as we have
discussed, this exception is not applicable in this case. Hence, following the general rule, the instant
case may be brought in the place of residence of the plaintiff or defendant, at the election of the
plaintiff (private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower court) was not alleged
in the complaint. Rather, what was alleged was the postal address of her sole proprietorship, Air
Swift International. It was only when private respondent testified in court, after petitioner was
declared in default, that she mentioned her residence to be in Better Living Subdivision, Paraaque
City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,34 the reverse happened. The plaintiff in that case
was Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti. The complaint,
however, did not allege the office or place of business of the corporation, which was in Binondo,
Manila. What was alleged was the residence of Dominador Ti, who lived in San Juan, Rizal. The case
was filed in the Court of First Instance of Rizal, Pasig. The Court there held that the evident purpose
of alleging the address of the corporations president and manager was to justify the filing of the
suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that there was no question that venue
was improperly laid in that case and held that the place of business of Tyson Enterpises, Inc. is
considered as its residence for purposes of venue. Furthermore, the Court held that the residence of
its president is not the residence of the corporation because a corporation has a personality
separate and distinct from that of its officers and stockholders.
In the instant case, it was established in the lower court that petitioner resides in San Fernando,
Pampanga35while private respondent resides in Paraaque City.36 However, this case was brought
in Pasay City, where the business of private respondent is found. This would have been permissible
had private respondents business been a corporation, just like the case in Sy v. Tyson Enterprises,
Inc. However, as admitted by private respondent in her Complaint37 in the lower court, her business
is a sole proprietorship, and as such, does not have a separate juridical personality that could
enable it to file a suit in court.38 In fact, there is no law authorizing sole proprietorships to file a suit
in court.39

A sole proprietorship does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise.40 The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by a single individual and
requires its proprietor or owner to secure licenses and permits, register its business name, and pay
taxes to the national government.41 The law does not vest a separate legal personality on the sole
proprietorship or empower it to file or defend an action in court.42
Thus, not being vested with legal personality to file this case, the sole proprietorship is not the
plaintiff in this case but rather Loreta Guina in her personal capacity. In fact, the complaint in the
lower court acknowledges in its caption that the plaintiff and defendant are Loreta Guina and Anita
Mangila, respectively. The title of the petition before us does not state, and rightly so, Anita
Mangila v. Air Swift International, but rather Anita Mangila v. Loreta Guina. Logically then, it is the
residence of private respondent Guina, the proprietor with the juridical personality, which should
be considered as one of the proper venues for this case.
All these considered, private respondent should have filed this case either in San Fernando,
Pampanga (petitioners residence) or Paraaque (private respondents residence). Since private
respondent (complainant below) filed this case in Pasay, we hold that the case should be dismissed
on the ground of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court, petitioner
expressly stated that she was filing the motion without submitting to the jurisdiction of the court.
At that time, petitioner had not been served the summons and a copy of the complaint.43 Thereafter,
petitioner timely filed a Motion to Dismiss44on the ground of improper venue. Rule 16, Section 1 of
the Rules of Court provides that a motion to dismiss may be filed "[W]ithin the time for but before
filing the answer to the complaint or pleading asserting a claim." Petitioner even raised the issue of
improper venue in his Answer45 as a special and affirmative defense. Petitioner also continued to
raise the issue of improper venue in her Petition for Review46 before this Court. We thus hold that
the dismissal of this case on the ground of improper venue is warranted.
The rules on venue, like other procedural rules, are designed to insure a just and orderly
administration of justice or the impartial and evenhanded determination of every action and
proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted
freedom to choose where to file the complaint or petition.47
We find no reason to rule on the other issues raised by petitioner.1wphi1.nt
WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of the
service of the writ of attachment. The decision of the Court of Appeals and the order of respondent
judge denying the motion to dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is hereby
dismissed without prejudice to refiling it in the proper venue. The attached properties of petitioner
are ordered returned to her immediately.
SO ORDERED.
Puno, Panganiban, and JJ., concur.
Sandoval-Gutierrez, J., On leave.

G.R. No. 160053 August 28, 2006

SPS. RENATO & ANGELINA LANTIN, Petitioners,
vs.
HON. JANE AURORA C. LANTION, Presiding Judge of the Regional Trial Court of Lipa City,
Fourth Judicial Region, Branch 13, PLANTERS DEVELOPMENT BANK, ELIZABETH C. UMALI,
ALICE PERCE, JELEN MOSCA, REGISTER OF DEEDS FOR LIPA CITY, BATANGAS, THE CLERK OF
COURT and EX-OFFICIO SHERIFF OF THE REGIONAL TRIAL COURT OF
BATANGAS, Respondents.
DECISION
QUISUMBING, J.:
This is a petition for certiorari assailing the orders dated May 15, 20031 and September 15, 20032 in
Civil Case No. 2002-0555 issued by public respondent, Presiding Judge Jane Aurora C. Lantion, of
the Regional Trial Court (RTC) of Lipa City, Batangas.
The facts of the case are as follows:
Petitioners Renato and Angelina Lantin took several peso and dollar loans from respondent
Planters Development Bank and executed several real estate mortgages and promissory notes to
cover the loans. They defaulted on the payments so respondent bank foreclosed the mortgaged lots.
The foreclosed properties, in partial satisfaction of petitioners debt, were sold at a public auction
where the respondent bank was the winning bidder. On November 8, 2003, petitioners filed against
Planters Development Bank and its officers Elizabeth Umali, Alice Perce and Jelen Mosca (private
respondents), a Complaint for Declaration of Nullity and/or Annulment of Sale and/or Mortgage,
Reconveyance, Discharge of Mortgage, Accounting, Permanent Injunction, and Damages with the
RTC of Lipa City, Batangas. Petitioners alleged that only their peso loans were covered by the
mortgages and that these had already been fully paid, hence, the mortgages should have been
discharged. They challenged the validity of the foreclosure on the alleged non-payment of their
dollar loans as the mortgages did not cover those loans.
Private respondents moved to dismiss the complaint on the ground of improper venue since the
loan agreements restricted the venue of any suit in Metro Manila.
On May 15, 2003, the respondent judge dismissed the case for improper venue.
Petitioners sought reconsideration. They argued that the trial court in effect prejudged the validity
of the loan documents because the trial court based its dismissal on a venue stipulation provided in
the agreement. The motion for reconsideration was denied and the lower court held that the
previous order did not touch upon the validity of the loan documents but merely ruled on the
procedural issue of venue.
Petitioners now come before us alleging that:
I

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR

EXCESS OF JURISDICTION IN HOLDING THAT THE VENUE STIPULATIONS IN THE "REAL ESTATE
MORTGAGE" AND "PROMISSORY NOTES" FALL WITHIN THE PURVIEW OF SECTION 4(B) OF RULE
4 OF THE 1997 RULES OF CIVIL PROCEDURE IN THAT IT LIMITED THE VENUE OF ACTIONS TO A
DEFINITE PLACE.
II
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT FINDING THAT THE MERE USE OF THE WORD "EXCLUSIVELY"
DOES NOT, BY ITSELF, MEAN THAT SUCH STIPULATIONS AUTOMATICALLY PROVIDE FOR AN
"EXCLUSIVE VENUE", AS CONTEMPLATED BY SECTION 4(B) OF RULE 4 OF THE 1997 RULES OF
CIVIL PROCEDURE, SPECIALLY WHEN THE TENOR OR LANGUAGE OF THE ENTIRE VENUE
STIPULATION CLEARLY PROVIDES OTHERWISE.
III
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN DISREGARDING THE FACT THAT HEREIN PETITIONERS COMPLAINT
INVOLVES SEVERAL CAUSES OF ACTION WHICH DO NOT ARISE SOLELY FROM THE "REAL
ESTATE MORTGAGE" AND "PROMISSORY NOTES" AND WHICH OTHER CAUSES OF ACTION MAY
BE FILED IN OTHER VENUES UNDER SECTIONS 1 AND 2 OF RULE 4 OF THE 1997 RULES OF CIVIL
PROCEDURE.
IV
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN DISREGARDING THE PRINCIPLE THAT THE RULE ON VENUE OF
ACTIONS IS ESTABLISHED FOR THE CONVENIENCE OF THE PLAINTIFFS.3
The main issue in the present petition is whether respondent judge committed grave abuse of
discretion when she dismissed the case for improper venue.
Petitioners contend that, since the validity of the loan documents were squarely put in issue,
necessarily this meant also that the validity of the venue stipulation also was at issue. Moreover,
according to the petitioners, the venue stipulation in the loan documents is not an exclusive venue
stipulation under Section 4(b) of Rule 4 of the 1997 Rules of Civil Procedure.4 The venue in the loan
agreement was not specified with particularity. Besides, petitioners posit, the rule on venue of
action was established for the convenience of the plaintiff, herein petitioners. Further, petitioners
also contend that since the complaint involves several causes of action which did not arise solely
from or connected with the loan documents, the cited venue stipulation should not be made to
apply.
Private respondents counter that, in their complaint, petitioners did not assail the loan documents,
and the issue of validity was merely petitioners afterthought to avoid being bound by the venue
stipulation. They also aver that the venue stipulation was not contrary to the doctrine
in Unimasters,5 which requires that a venue stipulation employ categorical and suitably limiting
language to the effect that the parties agree that the venue of actions between them should be laid

only and exclusively at a definite place. According to private respondents, the language of the
stipulation is clearly exclusive.
At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997 Rules of Civil
Procedure, the general rules on venue of actions shall not apply where the parties, before the filing
of the action, have validly agreed in writing on an exclusive venue. The mere stipulation on the
venue of an action, however, is not enough to preclude parties from bringing a case in other venues.
The parties must be able to show that such stipulation isexclusive.6 In the absence of qualifying or
restrictive words, the stipulation should be deemed as merely an agreement on an additional
forum, not as limiting venue to the specified place.7
The pertinent provisions of the several real estate mortgages and promissory notes executed by the
petitioner respectively read as follows:
18. In the event of suit arising out of or in connection with this mortgage and/or the promissory
note/s secured by this mortgage, the parties hereto agree to bring their causes of auction
(sic) exclusively in the proper court of Makati, Metro Manila or at such other venue chosen by the
Mortgagee, the Mortgagor waiving for this purpose any other venue.8 (Emphasis supplied.)
I/We further submit that the venue of any legal action arising out of this note shall exclusively be at
the proper court of Metropolitan Manila, Philippines or any other venue chosen by the
BANK, waiving for this purpose any other venue provided by the Rules of Court.9 (Emphasis
supplied.)
Clearly, the words "exclusively" and "waiving for this purpose any other venue" are restrictive and
used advisedly to meet the requirements.
Petitioners claim that effecting the exclusive venue stipulation would be tantamount to a
prejudgment on the validity of the loan documents. We note however that in their complaint,
petitioners never assailed the validity of the mortgage contracts securing their peso loans. They
only assailed the terms and coverage of the mortgage contracts. What petitioners claimed is that
their peso loans had already been paid thus the mortgages should be discharged, and that the
mortgage contracts did not include their dollar loans. In our view, since the issues of whether the
mortgages should be properly discharged and whether these also cover the dollar loans, arose out
of the said loan documents, the stipulation on venue is also applicable thereto.
Considering all the circumstances in this controversy, we find that the respondent judge did not
commit grave abuse of discretion, as the questioned orders were evidently in accord with law and
jurisprudence.
WHEREFORE, the petition is DISMISSED. The assailed orders dated May 15, 2003 and September
15, 2003 of the Regional Trial Court of Lipa City, Batangas, in Civil Case No. 2002-0555
are AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. L-37750 May 19, 1978

SWEET LINES, INC., petitioner,
vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO
TANDOG, JR., and ROGELIO TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.
Leovigildo Vallar for private respondents.

SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D. Tandog,
Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the complaint,
and the Motion for Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a
contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December 31,
1971 at the branch office of petitioner, a shipping company transporting inter-island passengers
and cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet
Hope" bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not
proceeding to Bohol, since many passengers were bound for Surigao, private respondents per
advice, went to the branch office for proper relocation to M/S "Sweet Town". Because the said
vessel was already filled to capacity, they were forced to agree "to hide at the cargo section to avoid
inspection of the officers of the Philippine Coastguard." Private respondents alleged that they were,
during the trip," "exposed to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not
honored and they were constrained to pay for other tickets. In view thereof, private respondents
sued petitioner for damages and for breach of contract of carriage in the alleged sum of P10,000.00
before respondents Court of First Instance of Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be
filed in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but
no avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the

respondent judge has departed from the accepted and usual course of judicial preoceeding" and
"had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further
with the case and required respondent to comment. 7 On January 18, 1974, We gave due course to
the petition and required respondent to answer. 8 Thereafter, the parties submitted their
respesctive memoranda in support of their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first
impression, to wit Is Condition No. 14 printed at the back of the petitioner's passage tickets
purchased by private respondents, which limits the venue of actions arising from the contract of
carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a
common carrier engaged in inter-island shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out of the ocntract of carriage should be
filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and took its
vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol that the condition of the venue of
actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an
effective waiver of venue, valid and binding as such, since it is printed in bold and capital letters and
not in fine print and merely assigns the place where the action sing from the contract is institution
likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and
phrases "any and all", "irrespective of where it is issued," and "shag" leave no doubt that the
intention of Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other places;
that the orders of the respondent Judge are an unwarranted departure from established
jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the
orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not
an essential element of the contract of carriage, being in itself a different agreement which requires
the mutual consent of the parties to it; that they had no say in its preparation, the existence of
which they could not refuse, hence, they had no choice but to pay for the tickets and to avail of
petitioner's shipping facilities out of necessity; that the carrier "has been exacting too much from
the public by inserting impositions in the passage tickets too burdensome to bear," that the
condition which was printed in fine letters is an imposition on the riding public and does not bind
respondents, citing cases; 13 that while venue 6f actions may be transferred from one province to
another, such arrangement requires the "written agreement of the parties", not to be imposed
unilaterally; and that assuming that the condition is valid, it is not exclusive and does not, therefore,
exclude the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner and
private respondents and that the passage tickets, upon which the latter based their complaint, are
the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or
consideration and object, are present. As held inPeralta de Guerrero, et al. v. Madrigal Shipping Co.,
Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship for
transportation from one place to another he is issued a ticket by the shipper which

has all the elements of a written contract, Namely: (1) the consent of the contracting
parties manifested by the fact that the passenger boards the ship and the shipper
consents or accepts him in the ship for transportation; (2) cause or consideration
which is the fare paid by the passenger as stated in the ticket; (3) object, which is
the transportation of the passenger from the place of departure to the place of
destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions one of
which is "Condition No. 14" which is in issue in this case printed at the back of the passage
tickets, these are commonly known as "contracts of adhesion," the validity and/or enforceability of
which will have to be determined by the peculiar circumstances obtaining in each case and the
nature of the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a
contract come about after deliberate drafting by the parties thereto, ... there are certain contracts
almost all the provisions of which have been drafted only by one party, usually a corporation. Such
contracts are called contracts of adhesion, because the only participation of the party is the signing
of his signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of
lots on the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into namely, that it
is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by
the other party, in this instance the passengers, private respondents, who cannot change the same
and who are thus made to adhere thereto on the "take it or leave it" basis certain guidelines in
the determination of their validity and/or enforceability have been formulated in order to that
justice and fan play characterize the relationship of the contracting parties. Thus, this Court
speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and
later through Justice Fernando in Fieldman Insurance v. Vargas, 18 held
The courts cannot ignore that nowadays, monopolies, cartels and concentration of
capital endowed with overwhelm economic power, manage to impose upon parties
d with them y prepared 'agreements' that the weaker party may not change one
whit his participation in the 'agreement' being reduced to the alternative 'to take it
or leave it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d'
adhesion) in contrast to those entered into by parties bargaining on an equal footing.
Such contracts (of which policies of insurance and international bill of lading are
prime examples) obviously cap for greater strictness and vigilance on the part of the
courts of justice with a view to protecting the weaker party from abuses and
imposition, and prevent their becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code
In all contractual property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the
inter-island ship. ping industry in the country today, We find and hold that Condition No. 14 printed
at the back of the passage tickets should be held as void and unenforceable for the following

reasons first, under circumstances obligation in the inter-island ship. ping industry, it is not just and
fair to bind passengers to the terms of the conditions printed at the back of the passage tickets, on
which Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public
policy on transfer of venue of proceedings of this nature, since the same will prejudice rights and
interests of innumerable passengers in different s of the country who, under Condition No. 14, will
have to file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of
and acute shortage in inter- island vessels plying between the country's several islands, and the
facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers
are congested with passengers and their cargo waiting to be transported. The conditions are even
worse at peak and/or the rainy seasons, when Passengers literally scramble to whatever
accommodations may be availed of, even through circuitous routes, and/or at the risk of their
safety their immediate concern, for the moment, being to be able to board vessels with the hope
of reaching their destinations. The schedules are as often as not if not more so delayed or
altered. This was precisely the experience of private respondents when they were relocated to M/S
"Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust
coming from the ship's cargo of corn grits, " because even the latter was filed to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to examine their
tickets received from crowded/congested counters, more often than not during rush hours, for
conditions that may be printed much charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner,
respondents had no say in its preparation. Neither did the latter have the opportunity to take the
into account prior to the purpose chase of their tickets. For, unlike the small print provisions of
contracts the common example of contracts of adherence which are entered into by the
insured in his awareness of said conditions, since the insured is afforded the op to and co the same,
passengers of inter-island v do not have the same chance, since their alleged adhesion is presumed
only from the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of certificates of public
convenience and therefore, posses a virtual monopoly over the business of transporting passengers
between the ports covered by their franchise. This being so, shipping companies, like petitioner,
engaged in inter-island shipping, have a virtual monopoly of the business of transporting
passengers and may thus dictate their terms of passage, leaving passengers with no choice but to
buy their tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of the
fact that the bulk of those who board these inter-island vested come from the low-income groups
and are less literate, and who have little or no choice but to avail of petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties in
writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it
practically negates the action of the claimants, such as the private respondents herein. The
philosophy underlying the provisions on transfer of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the expense and
trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of
Cebu, he would most probably decide not to file the action at all. The condition will thus defeat,

instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in
the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the
filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause
inconvenience to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do
that which has a tendency to be injurious to the public or against the public good ... 22 Under this
principle" ... freedom of contract or private dealing is restricted by law for the good of the
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest,
since it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus
placing petitioner company at a decided advantage over said persons, who may have perfectly
legitimate claims against it. The said condition should, therefore, be declared void and
unenforceable, as contrary to public policy to make the courts accessible to all who may have
need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.

G.R. No. 119657 February 7, 1997

UNIMASTERS CONGLOMERATION, INC., petitioner,
vs.
COURT OF APPEALS and KUBOTA AGRI MACHINERY PHILIPPINES, INC., respondents.

NARVASA, C.J.:
The appellate proceeding at bar turns upon the interpretation of a stipulation in a contract
governing venue of actions thereunder arising.
On October 8, 1988 Kubota Agri-Machinery Philippines, Inc. (hereafter, simply KUBOTA) and
Unimasters Conglomeration, Inc. (hereafter, simply UNIMASTERS) entered into a "Dealership
Agreement for Sales and Services" of the former's products in Samar and Leyte Provinces. 1 The
contract contained, among others:
1) a stipulation reading: ". . . All suits arising out of this Agreement shall be filed with/in the proper
Courts of Quezon City," and
2) a provision binding UNIMASTERS to obtain (as it did in fact obtain) a credit line with
Metropolitan Bank and Trust Co.-Tacloban Branch in the amount of P2,000,000.00 to answer for its
obligations to KUBOTA.
Some five years later, or more precisely on December 24, 1993, UNIMASTERS filed an action in the
Regional Trial Court of Tacloban City against KUBOTA, a certain Reynaldo Go, and Metropolitan
Bank and Trust Company-Tacloban Branch (hereafter, simply METROBANK) for damages for

breach of contract, and injunction with prayer for temporary restraining order. The action was
docketed as Civil Case No. 93-12-241 and assigned to Branch 6.
On the same day the Trial Court issued a restraining order enjoining METROBANK from
"authorizing or effecting payment of any alleged obligation of . . (UNIMASTERS) to defendant . .
KUBOTA arising out of or in connection with purchases made by defendant Go against the credit
line caused to be established by . . (UNIMASTERS) for and in the amount of P2 million covered by
defendant METROBANK . . or by way of charging . . (UNIMASTERS) for any amount paid and
released to defendant . . (KUBOTA) by the Head Office of METROBANK in Makati, Metro-Manila . . ."
The Court also set the application for preliminary injunction for hearing on January 10, 1994 at
8:30 o'clock in the morning.
On January 4, 1994 KUBOTA filed-two motions. One prayed for dismissal of the case on the ground
of improper venue (said motion being set for hearing on January 11, 1994). The other prayed for
the transfer of the injunction hearing to January 11, 1994 because its counsel was not available on
January 10 due to a prior commitment before another court.
KUBOTA claims that notwithstanding that its motion to transfer hearing had been granted, the Trial
Court went ahead with the hearing on the injunction incident on January 10, 1994 during which it
received the direct testimony of UNIMASTERS' general manager, Wilford Chan; that KUBOTA's
counsel was "shocked" when he learned of this on the morning of the 11th, but was nonetheless
instructed to proceed to cross-examine the witness; that when said counsel remonstrated that this
was unfair, the Court reset the hearing to the afternoon of that same day, at which time Wilford
Chan was recalled to the stand to repeat his direct testimony. It appears that cross-examination of
Chan was then undertaken by KUBOTA's lawyer with the "express reservation that . . (KUBOTA
was) not (thereby) waiving and/or abandoning its motion to dismiss;" and that in the course of the
cross-examination, exhibits (numbered from 1 to 20) were presented by said attorney who
afterwards submitted a memorandum in lieu of testimonial evidence. 2
On January 13, 1994, the Trial Court handed down an Order authorizing the issuance of the
preliminary injunction prayed for, upon a bond of P2,000,000.00. 3 And on February 3, 1994, the
same Court promulgated an Order denying KUBOTA's motion to dismiss. Said the Court:
The plaintiff UNIMASTERS Conglomeration is holding its principal place of business
in the City of Tacloban while the defendant . . (KUBOTA) is holding its principal
place of business in Quezon City. The proper venue therefore pursuant to Rules of
Court would either be Quezon City or Tacloban City at the election of the plaintiff.
Quezon City and Manila (sic), as agreed upon by the parties in the Dealership
Agreement, are additional places other than the place stated in the Rules of Court.
The filing, therefore, of this complaint in the Regional Trial Court in Tacloban City is
proper.
Both orders were challenged as having been issued with grave abuse of discretion by KUBOTA in a
special civil action of certiorari and prohibition filed with the Court of Appeals, docketed as CA-G.R.
SP No. 33234. It contended, more particularly, that (1) the RTC had "no jurisdiction to take
cognizance of . . (UNIMASTERS') action considering that venue was improperly laid," (2)
UNIMASTERS had in truth "failed to prove that it is entitled to the . . writ of preliminary injunction;"
and (3) the RTC gravely erred "in denying the motion to dismiss." 4

The Appellate Court agreed with KUBOTA that in line with the Rules of Court 5 and this Court's
relevant rulings 6 the stipulation respecting venue in its Dealership Agreement with
UNIMASTERS did in truth limit the venue of all suits arising thereunder only and exclusively to "the
proper courts of Quezon City." 7 The Court also held that the participation of KUBOTA's counsel at
the hearing on the injunction incident did not in the premises operate as a waiver or abandonment
of its objection to venue; that assuming that KUBOTA's standard printed invoices provided that the
venue of actions thereunder should be laid at the Court of the City of Manila, this was
inconsequential since such provision would govern "suits or legal actions between petitioner and
its buyers" but not actions under the Dealership Agreement between KUBOTA and UNIMASTERS,
the venue of which was controlled by paragraph No. 7 thereof; and that no impediment precludes
issuance of a TRO or injunctive writ by the Quezon City RTC against METROBANK-Tacloban since
the same "may be served on the principal office of METROBANK in Makati and would be binding on
and enforceable against, METROBANK branch in Tacloban."
After its motion for reconsideration of that decision was turned down by the Court of Appeals,
UNIMASTERS appealed to this Court. Here, it ascribes to the Court of Appeals several errors which
it believes warrant reversal of the verdict, namely: 8
1) "in concluding, contrary to decisions of this . . Court, that the agreement on venue between
petitioner (UNIMASTERS) and private respondent (KUBOTA) limited to the proper courts of
Quezon City the venue of any complaint filed arising from the dealership agreement between . .
(them);"
2) "in ignoring the rule settled in Philippine Banking Corporation vs. Tensuan, 9 that 'in the absence
of qualifying or restrictive words, venue stipulations in a contract should be considered merely as
agreement on additional forum, not as limiting venue to the specified place;" and in concluding,
contrariwise, that the agreement in the case at bar "was the same as the agreement on venue in
the Gesmundo case," and therefore, the Gesmundo case was controlling; and
3) "in concluding, based solely on the self-serving narration of . . (KUBOTA that its) participation in
the hearing for the issuance of a . . preliminary injunction did not constitute waiver of its objection
to venue."
The issue last mentioned, of whether or not the participation by the lawyer of KUBOTA at the
injunction hearing operated as a waiver of its objection to venue, need not occupy the Court too
long. The record shows that when KUBOTA's counsel appeared before the Trial Court in the
morning of January 11, 1994 and was then informed that he should cross-examine UNIMASTERS'
witness, who had testified the day before, said counsel drew attention to the motion to dismiss on
the ground of improper venue and insistently attempted to argue the matter and have it ruled upon
at the time; and when the Court made known its intention (a) "to (resolve first the) issue (of) the
injunction then rule on the motion to dismiss," and (b) consequently its desire to forthwith
conclude the examination of the witness on the injunction incident, and for that purpose reset the
hearing in the afternoon of that day, the 11th, so that the matter might be resolved before the lapse
of the temporary restraining order on the 13th, KUBOTA's lawyer told the Court: "Your Honor, we
are not waiving our right to submit the Motion to Dismiss."10 It is plain that under these
circumstances, no waiver or abandonment can be imputed to KUBOTA.

The essential question really is that posed in the first and second assigned errors, i.e., what
construction should be placed on the stipulation in the Dealership Agreement that" (a)ll suits
arising out of this Agreement shall be filed with/in the proper Courts of Quezon City."
Rule 4 of the Rules of Court sets forth the principles generally governing the venue of actions,
whether real or personal, or involving persons who neither reside nor are found in the Philippines
or otherwise. Agreements on venue are explicitly allowed. "By written agreement of the parties the
venue of an action may be changed or transferred from one province to another." 11 Parties may by
stipulation waive the legal venue and such waiver is valid and effective being merely a personal
privilege, which is not contrary to public policy or prejudicial to third persons. It is a general
principle that a person may renounce any right which the law gives unless such renunciation would
be against public policy. 12
Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in the
place agreed upon, or merely permissive in that the parties may file their suit not only in the place
agreed upon but also in the places fixed by law (Rule 4, specifically). As in any other agreement,
what is essential is the ascertainment of the intention of the parties respecting the matter.
Since convenience is the raison d'etre of the rules of venue, 13 it is easy to accept the proposition
that normally, venue stipulations should be deemed permissive merely, and that interpretation
should be adopted which most serves the parties' convenience. In other words, stipulations
designating venues other than those assigned by Rule 4 should be interpreted as designed to make
it more convenient for the parties to institute actions arising from or in relation to their
agreements; that is to say, as simply adding to or expanding the venues indicated in said Rule 4.
On the other hand, because restrictive stipulations are in derogation of this general policy, the
language of the parties must be so clear and categorical as to leave no doubt of their intention to
limit the place or places, or to fix places other than those indicated in Rule 4, for their actions. This
is easier said than done, however, as an examination of precedents involving venue covenants will
immediately disclose.
In at least thirteen (13) cases, this Court construed the venue stipulations involved as merely
permissive. These are:
1. Polytrade Corporation v. Blanco, decided in 1969. 14 In this case, the venue stipulation was as
follows:
The parties agree to sue and be sued in the Courts of Manila.
This Court ruled that such a provision "does not preclude the filing of suits in the residence of the
plaintiff or the defendant. The plain meaning is that the parties merely consented to be sued in
Manila. Qualifying or restrictive words which would indicate that Manila and Manila alone is the
venue are totally absent therefrom. It simply is permissive. The parties solely agreed to add the
courts of Manila as tribunals to which they may resort. They did not waive their right to pursue
remedy in the courts specifically mentioned in Section 2(b) of Rule 4."
The Polytrade doctrine was reiterated expressly or implicitly in subsequent cases, numbering at
least ten (10).

2. Nicolas v. Reparations Commission, decided in 1975. 15 In this case, the stipulation on venue read:
. . . (A)ll legal actions arising out of this contract . . may be brought in and submitted
to the jurisdiction of the proper courts in the City of Manila.
This Court declared that the stipulation does not clearly show the intention of the parties to limit
the venue of the action to the City of Manila only. "It must be noted that the venue in personal
actions is fixed for the convenience of the plaintiff and his witnesses and to promote the ends of
justice. We cannot conceive how the interest of justice may be served by confining the situs of the
action to Manila, considering that the residences or offices of all the parties, including the situs of
the acts sought to be restrained or required to be done, are all within the territorial jurisdiction of
Rizal. . . Such agreements should be construed reasonably and should not be applied in such a
manner that it would work more to the inconvenience of the parties without promoting the ends of
justice.
3. Lamis Ents. v. Lagamon, decided in 1981. 16 Here, the stipulation in the promissory note and the
chattel mortgage specified Davao City as the venue.
The Court, again citing Polytrade, stated that the provision "does not preclude the filing of suits in
the residence of plaintiff or defendant under Section 2(b), Rule 4, Rules of Court, in the absence of
qualifying or restrictive words in the agreement which would indicate that the place named is the
only venue agreed upon by the parties. The stipulation did not deprive . . (the affected party) of his
right to pursue remedy in the court specifically mentioned in Section 2(b) of Rule 4, Rules of
Court. Renuntiato non praesumitur."
4. Capati v. Ocampo, decided in 1982 17 In this case, the provision of the contract relative to venue
was as follows:
. . . (A)ll actions arising out, or relating to this contract may be instituted in the Court
of First Instance of the City of Naga.
The Court ruled that the parties "did not agree to file their suits solely and exclusively with the
Court of First Instance of Naga;" they "merely agreed to submit their disputes to the said court
without waiving their right to seek recourse in the court specifically indicated in Section 2 (b), Rule
4 of the Rules of Court."
5. Western Minolco v. Court of Appeals, decided in 1988. 18 Here, the provision governing venue
read:
The parties stipulate that the venue of the actions referred to in Section 12.01 shall
be in the City of Manila.
The court restated the doctrine that a stipulation in a contract fixing a definite place for the
institution of an action arising in connection therewith, does not ordinarily supersede the general
rules set out in Rule 4, and should be construed merely as an agreement on an additional forum, not
as limiting venue to the specified place.
6. Moles v. Intermediate Appellate Court, decided in 1989. 19 In this proceeding, the Sales Invoice of a
linotype machine stated that the proper venue should be Iloilo.

This Court held that such an invoice was not the contract of sale of the linotype machine in
question; consequently the printed provisions of the invoice could not have been intended by the
parties to govern the sale of the machine, especially since said invoice was used for other types of
transactions. This Court said: "It is obvious that a venue stipulation, in order to bind the parties,
must have been intelligently and deliberately intended by them to exclude their case from the
reglementary rules on venue. Yet, even such intended variance may not necessarily be given judicial
approval, as, for instance, where there are no restrictive or qualifying words in the agreement
indicating that venue cannot be laid in any place other than that agreed upon by the parties, and in
contracts of adhesion."
7. Hongkong and Shanghai Banking Corp. v. Sherman, decided in 1989. 20 Here the stipulation on
venue read:
. . (T)his guarantee and all rights, obligations and liabilities arising hereunder shall
be construed and determined under and may be enforced in accordance with the
laws of the Republic of Singapore. We hereby agree that the Courts in Singapore
shall have jurisdiction over all disputes arising under this guarantee. . .
This Court held that due process dictates that the stipulation be liberally construed. The parties did
not thereby stipulate that only the courts of Singapore, to the exclusion of all the others, had
jurisdiction. The clause in question did not operate to divest Philippine courts of jurisdiction.
8. Nasser v. Court of Appeals, decided in 1990, 21 in which the venue stipulation in the promissory
notes in question read:
. . (A)ny action involving the enforcement of this contract shall be brought within the
City of Manila, Philippines.
The Court's verdict was that such a provision does not as a rule supersede the general rule set out
in Rule 4 of the Rules of Court, and should be construed merely as an agreement on an additional
forum, not as limiting venue to the specified place.
9. Surigao Century Sawmill Co., Inc. v. Court of Appeals, decided in 1993: 22 In this case, the provision
concerning venue was contained in a contract of lease of a barge, and read as follows:
. . . (A)ny disagreement or dispute arising out of the lease shall be settled by the
parties in the proper court in the province of Surigao del Norte.
The venue provision was invoked in an action filed in the Regional Trial Court of Manila to recover
damages arising out of marine subrogation based on a bill of lading. This Court declared that since
the action did not refer to any disagreement or dispute arising out of the contract of lease of the
barge, the venue stipulation in the latter did not apply; but that even assuming the contract of lease
to be applicable, a statement in a contract as to venue does not preclude the filing of suits at the
election of the plaintiff where no qualifying or restrictive words indicate that the agreed place alone
was the chosen venue.
10. Philippine Banking Corporation, v. Hon. Salvador Tensuan, etc., Circle Financial Corporation, at al.,
decided in 1993. 23 Here, the stipulation on venue was contained in promissory notes and read as
follows:

I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela any
legal action which may arise out of this promissory note.
This Court held the stipulation to be merely permissive since it did not lay the venue in Valenzuela
exclusively or mandatorily. The plain or ordinary import of the stipulation is the grant of authority
or permission to bring suit in Valenzuela; but there is not the slightest indication of an intent to bar
suit in other competent courts. The Court stated that there is no necessary or customary connection
between the words "any legal action" and an intent strictly to limit permissible venue to the
Valenzuela courts. Moreover, since the venue stipulations include no qualifying or exclusionary
terms, express reservation of the right to elect venue under the ordinary rules was unnecessary in
the case at bar. The Court made clear that "to the extent Bautista and Hoechst Philippines are
inconsistent with Polytrade (an en banc decision later in time than Bautista) and subsequent cases
reiteratingPolytrade, Bautista and Hoechst Philippines have been rendered obsolete by the
Polytrade line of cases."
11. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Brinell Metal Works Corp., et al.,
decided in 1994: 24 In this case the subject promissory notes commonly contained a stipulation
reading:
I/we expressly submit to the jurisdiction of the courts of Manila, any legal action
which may arise out of this promissory note.
the Court restated the rule in Polytrade that venue stipulations in a contract, absent any
qualifying or restrictive words, should be considered merely as an agreement on additional
forum, not limiting venue to the specified place. They are not exclusive, but rather,
permissive. For to restrict venue only to that place stipulated in the agreement is a
construction purely based on technicality; on the contrary, the stipulation should be
liberally construed. The Court stated: "The later cases of Lamis Ents v. Lagamon [108 SCRA
1981], Capati v. Ocampo [113 SCRA 794 [1982], Western Minolco v. Court of Appeals [167
SCRA 592 [1988], Moles v. Intermediate Appellate Court [169 SCRA 777 [1989], Hongkong
and Shanghai Banking Corporation v. Sherman [176 SCRA 331], Nasser v. Court of
Appeals [191 SCRA 783 [1990] and just recently, Surigao Century Sawmill Co. v. Court of
Appeals [218 SCRA 619 [1993], all treaded the path blazed by Polytrade. The conclusion to
be drawn from all these is that the more recent jurisprudence shall properly be deemed
modificatory of the old ones."
The lone dissent observed: "There is hardly any question that a stipulation of contracts of adhesion,
fixing venue to a specified place only, is void for, in such cases, there would appear to be no valid
and free waiver of the venue fixed by the Rules of Courts. However, in cases where both parties
freely and voluntarily agree on a specified place to be the venue of actions, if any, between them,
then the only considerations should be whether the waiver (of the venue fixed by the Rules of
Court) is against public policy and whether the parties would suffer, by reason of such waiver,
undue hardship and inconvenience; otherwise, such waiver of venue should be upheld as binding
on the parties. The waiver of venue in such cases is sanctioned by the rules on jurisdiction."
Still other precedents adhered to the same principle.
12. Tantoco v. Court of Appeals, decided in 1977. 25 Here, the parties agreed in their sales contracts
that the courts of Manila shall have jurisdiction over any legal action arising out of their transaction.

This Court held that the parties agreed merely to add the courts of Manila as tribunals to which they
may resort in the event of suit, to those indicated by the law: the courts either of Rizal, of which
private respondent was a resident, or of Bulacan, where petitioner resided.
13. Sweet Lines, Inc. v. Teves, promulgated in 1987. 26 In this case, a similar stipulation on venue,
contained in the shipping ticket issued by Sweet Lines, Inc. (as Condition 14)
. . that any and all actions arising out or the condition and provisions of this ticket,
irrespective of where it is issued, shall be filed in the competent courts in the City of
Cebu
was declared unenforceable, being subversive of public policy. The Court explained that
the philosophy on transfer of venue of actions is the convenience of the plaintiffs as well as
his witnesses and to promote the ends of justice; and considering the expense and trouble a
passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu,
he would most probably decide not to file the action at all.
On the other hand, in the cases hereunder mentioned, stipulations on venue were held to be
restrictive, or mandatory.
1. Bautista vs. De Borja, decided in 1966. 27 In this case, the contract provided that in case of any
litigation arising therefrom or in connection therewith, the venue of the action shall be in the City of
Manila. This Court held that without either party reserving the right to choose the venue of action
as fixed by law, it can reasonably be inferred that the parties intended to definitely fix the venue of
the action, in connection with the contract sued upon in the proper courts of the City of Manila only,
notwithstanding that neither party is a resident of Manila.
2. Gesmundo v. JRB Realty Corporation, decided in 1994. 28 Here the lease contract declared that
. . (V)enue for all suits, whether for breach hereof or damages or any cause between
the LESSOR and LESSEE, and persons claiming under each, . . (shall be) the courts of
appropriate jurisdiction in Pasay City. . .
This Court held that: "(t)he language used leaves no room for interpretation. It clearly evinces the
parties' intent to limit to the 'courts of appropriate jurisdiction of Pasay City' the venue for all suits
between the lessor and the lessee and those between parties claiming under them. This means a
waiver of their right to institute action in the courts provided for in Rule 4, sec. 2(b)."
3. Hoechst Philippines, Inc. v. Torres, 29 decided much earlier, in 1978, involved a strikingly similar
stipulation, which read:
. . (I)n case of any litigation arising out of this agreement, the venue of any action
shall be in the competent courts of the Province of Rizal.
This Court held: "No further stipulations are necessary to elicit the thought that both parties agreed
that any action by either of them would be filed only in the competent courts of Rizal province
exclusively."

4. Villanueva v. Mosqueda, decided in 1982. 30 In this case, it was stipulated that if the lessor violated
the contract of lease he could be sued in Manila, while if it was the lessee who violated the contract,
the lessee could be sued in Masantol, Pampanga. This Court held that there was an agreement
concerning venue of action and the parties were bound by their agreement. "The agreement as to
venue was not permissive but mandatory."
5. Arquero v. Flojo, decided in 1988. 31 The condition respecting venue that any action against
RCPI relative to the transmittal of a telegram must be brought in the courts of Quezon City alone
was printed clearly in the upper front portion of the form to be filled in by the sender. This Court
held that since neither party reserved the right to choose the venue of action as fixed by Section 2
[b], Rule 4, as is usually done if the parties mean to retain the right of election so granted by Rule 4,
it can reasonably be inferred that the parties intended to definitely fix the venue of action, in
connection with the written contract sued upon, in the courts of Quezon City only.
An analysis of these precedents reaffirms and emphasizes the soundness of the Polytrade principle.
Of the essence is the ascertainment of the parties' intention in their agreement governing the venue
of actions between them. That ascertainment must be done keeping in mind that convenience is the
foundation of venue regulations, and that construction should be adopted which most conduces
thereto. Hence, the invariable construction placed on venue stipulations is that they do not negate
but merely complement or add to the codal standards of Rule 4 of the Rules of Court. In other
words, unless the parties make very clear, by employing categorical and suitably limiting language,
that they wish the venue of actions between them to be laid only and exclusively at a definite place,
and to disregard the prescriptions of Rule 4, agreements on venue are not to be regarded as
mandatory or restrictive, but merely permissive, or complementary of said rule. The fact that in
their agreement the parties specify only one of the venues mentioned in Rule 4, or fix a place for
their actions different from those specified by said rule, does not, without more, suffice to
characterize the agreement as a restrictive one. There must, to repeat, be accompanying language
clearly and categorically expressing their purpose and design that actions between them be
litigated only at the place named by them, 32 regardless of the general precepts of Rule 4; and any
doubt or uncertainty as to the parties' intentions must be resolved against giving their agreement a
restrictive or mandatory aspect. Any other rule would permit of individual, subjective judicial
interpretations without stable standards, which could well result in precedents in hopeless
inconsistency.
The record of the case at bar discloses that UNIMASTERS has its principal place of business in
Tacloban City, and KUBOTA, in Quezon City. Under Rule 4, the venue of any personal action
between them is "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." 33 In other words, Rule 4
gives UNIMASTERS the option to sue KUBOTA for breach of contract in the Regional Trial Court of
either Tacloban City or Quezon City.
But the contract between them provides that " . . All suits arising out of this Agreement shall be filed
with / in the proper Courts of Quezon City," without mention of Tacloban City. The question is
whether this stipulation had the effect of effectively eliminating the latter as an optional venue and
limiting litigation between UNIMASTERS and KUBOTA only and exclusively to Quezon City.
In light of all the cases above surveyed, and the general postulates distilled therefrom, the question
should receive a negative answer. Absent additional words and expressions definitely and
unmistakably denoting the parties' desire and intention that actions between them should be

ventilated only at the place selected by them, Quezon City or other contractual provisions clearly
evincing the same desire and intention the stipulation should be construed, not as confining suits
between the parties only to that one place, Quezon City, but as allowing suits either in Quezon City
or Tacloban City, at the option of the plaintiff (UNIMASTERS in this case).
One last word, respecting KUBOTA's theory that the Regional Trial Court had "no jurisdiction to
take cognizance of . . (UNIMASTERS') action considering that venue was improperly laid." This is
not an accurate statement of legal principle. It equates venue with jurisdiction; but venue has
nothing to do with jurisdiction, except in criminal actions. This is fundamental. 34 The action at bar,
for the recovery of damages in an amount considerably in excess of P20,000,00, is assuredly within
the jurisdiction of a Regional Trial Court. 35 Assuming that venue were improperly laid in the Court
where the action was instituted, the Tacloban City RTC, that would be a procedural, not a
jurisdictional impediment precluding ventilation of the case before that Court of wrong
venue notwitstanding that the subject matter is within its jurisdiction. However, if the objection to
venue is waived by the failure to set it up in a motion to dismiss, 36 the RTC would proceed in
perfectly regular fashion if it then tried and decided the action.
This is true also of real actions. Thus, even if a case "affecting title to, or for recovery of possession,
or for partition or condemnation of, or foreclosure of mortgage on, real property" 37 were
commenced in a province or city other than that "where the property or any part thereof lies," 38 if
no objection is seasonably made in a motion to dismiss, the objection is deemed waived, and the
Regional Trial Court would be acting entirely within its competence and authority in proceeding to
try and decide the suit. 39
WHEREFORE, the appealed judgment of the Court of Appeals is REVERSED, the Order of the
Regional Trial Court of Tacloban City, Branch 6, dated February 3, 1994, is REINSTATED and
AFFIRMED, and said Court is DIRECTED to forthwith proceed with Civil Case No. 93-12-241 in due
course.
SO ORDERED.

G.R. No. 166920

February 19, 2007

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER

HENRICHSEN, Petitioners,
vs.
KLAUS K. SCHONFELD, Respondent.
DECISION
CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the
Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029319-01,
which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-00
dismissing the complaint of respondent Klaus K. Schonfeld.
The antecedent facts are as follows:
Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia,
Canada. He had been a consultant in the field of environmental engineering and water supply and
sanitation. Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in
accordance with the laws of the Philippines. The primary purpose of PPI was to engage in the
business of providing specialty and technical services both in and out of the Philippines.2 It is a
subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter
Henrichsen, who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted
from Japan to Manila and vice versa, as well as in other countries where PCIJ had business.
In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines.
In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI
in its Water and Sanitation Department. However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary was to be paid partly by PPI and PCIJ.
On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada,
requesting him to accept the same and affix his conformity thereto. Respondent made some
revisions in the letter of employment and signed the contract.3 He then sent a copy to Henrichsen.
The letter of employment reads:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7
January 1998
Dear Mr. Schonfeld,
Letter of Employment
This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement under which you will be engaged by our Company on the terms and conditions defined
hereunder. In case of any discrepancies or contradictions between this Letter of Employment and
the General Conditions of Employment, this Letter of Employment will prevail.
You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines,
Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a separate contract,
which will define that part of the present terms and conditions for which Pacicon is responsible. In
case of any discrepancies or contradictions between the present Letter of Employment and the

contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its
obligations, this Letter of Employment will prevail.
1. Project Country: The Philippines with possible short-term assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager, Water and Sanitation.
5. Commencement: 1st October 1997.
6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary
(US$2,100.00 per month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI
to bank accounts to be nominated by you.
A performance related component corresponding to 17.6% of the total annual
remuneration, subject to satisfactory performance against agreed tasks and targets, paid
offshore.
7. Accommodation: The company will provide partly furnished accommodation to a rent
including association fees, taxes and VAT not exceeding the Pesos equivalent of US$2,900.00
per month.
8. Transportation: Included for in the remuneration.
9. Leave Travels: You are entitled to two leave travels per year.
10. Shipment of Personal
Effects: The maximum allowance is US$4,000.00.
11. Mobilization
Travel: Mobilization travel will be from New Westminster, B.C., Canada.
This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.
Yours sincerely,
Pacific Consultants International
Jens Peter Henrichsen
Above terms and conditions accepted
Date: 2 March 1998

(Sgd.)
Klaus Schonfeld
as annotated and initialed4
Section 21 of the General Conditions of Employment appended to the letter of employment reads:
21 Arbitration
Any question of interpretation, understanding or fulfillment of the conditions of employment, as
well as any question arising between the Employee and the Company which is in consequence of or
connected with his employment with the Company and which can not be settled amicably, is to be
finally settled, binding to both parties through written submissions, by the Court of Arbitration in
London.5
Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was
accorded the status of a resident alien.
As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor
Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the Department
of Labor and Employment (DOLE). It appended respondents contract of employment to the
application.1awphi1.net
On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It
reads:
Republic of the Philippines
Department of Labor & Employment
National Capital Region
ALIEN EMPLOYMENT PERMIT
ISSUED TO: SCHONFELD, KLAUS KURT
DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian
POSITION: VP WATER & SANITATION
EMPLOYER: PACICON PHILIPPINES, INC.
ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City
PERMIT
ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:
VALID UNTIL: January 7, 2000 (Sgd.)

APPROVED: BIENVENIDO S. LAGUESMA

By: MAXIMO B. ANITO
REGIONAL DIRECTOR
(Emphasis supplied)6
Respondent received his compensation from PPI for the following periods: February to June 1998,
November to December 1998, and January to August 1999. He was also reimbursed by PPI for the
expenses he incurred in connection with his work as sector manager. He reported for work in
Manila except for occasional assignments abroad, and received instructions from Henrichsen.7
On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment
had been terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been
successful in the water and sanitation sector in the Philippines.8 However, on July 24, 1999,
Henrichsen, by electronic mail,9 requested respondent to stay put in his job after August 5, 1999,
until such time that he would be able to report on certain projects and discuss all the opportunities
he had developed.10 Respondent continued his work with PPI until the end of business hours on
October 1, 1999.
Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from
Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of his claims
(US$5,635.99), but refused to pay the rest.
On December 5, 2000, respondent filed a Complaint11 for Illegal Dismissal against petitioners PPI
and Henrichsen with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.
In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE
of its decision to close one of its departments, which resulted in his dismissal; and they failed to
notify him that his employment was terminated after August 4, 1999. Respondent also claimed for
separation pay and other unpaid benefits. He alleged that the company acted in bad faith and
disregarded his rights. He prayed for the following reliefs:
1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to
his former position without loss of seniority and other privileges and benefits, and to pay
his full backwages from the time compensation was with held (sic) from him up to the time
of his actual reinstatement. In the alternative, if reinstatement is no longer feasible,
respondents must pay the complainant full backwages, and separation pay equivalent to
one month pay for every year of service, or in the amount of US$16,400.00 as separation
pay;
2. Judgment be rendered ordering the respondents to pay the outstanding monetary
obligation to complainant in the amount of US$10,131.76 representing the balance of
unpaid salaries, leave pay, cost of his air travel and shipment of goods from Manila to
Canada; and
3. Judgment be rendered ordering the respondent company to pay the complainant
damages in the amount of no less than US $10,000.00 and to pay 10% of the total monetary
award as attorneys fees, and costs.

Other reliefs just and equitable under the premises are, likewise, prayed for.12 1awphi1.net
Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter
had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred that
respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He was
employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since
respondents cause of action was based on his letter of employment executed in Tokyo, Japan dated
January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in
Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his
complaint against PPI before the NLRC in the Philippines. Moreover, under Section 12 of the
General Conditions of Employment appended to the letter of employment dated January 7, 1998,
complainant and PCIJ had agreed that any employment-related dispute should be brought before
the London Court of Arbitration. Since even the Supreme Court had already ruled that such an
agreement on venue is valid, Philippine courts have no jurisdiction.13
Respondent opposed the Motion, contending that he was employed by PPI to work in the
Philippines under contract separate from his January 7, 1998 contract of employment with PCIJ. He
insisted that his employer was PPI, a Philippine-registered corporation; it is inconsequential that
PPI is a wholly-owned subsidiary of PCIJ because the two corporations have separate and distinct
personalities; and he received orders and instructions from Henrichsen who was the president of
PPI. He further insisted that the principles of forum non conveniens and lex loci contractus do not
apply, and that although he is a Canadian citizen, Philippine Labor Laws apply in this case.
Respondent adduced in evidence the following contract of employment dated January 9, 1998
which he had entered into with Henrichsen:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Manila 9 January, 1998
Dear Mr. Schonfeld,
Letter of Employment
This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement, under which you will be engaged by Pacicon Philippines, Inc. on the terms and
conditions defined hereunder.
1. Project Country: The Philippines with possible assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager Water and Sanitation Sector.

5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by
you.
7. Accommodation: The company will provide partly furnished accommodation to a rent
including association fees, taxes and VAT not exceeding the Pesos equivalent of US$2300.00
per month.
8. Transportation: Included for in the remuneration.
9. Shipment of Personal The maximum allowance is US$2500.00 in Effects: connection with
initial shipment of personal effects from Canada.
10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.
This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.
Yours sincerely,
Pacicon Philippines, Inc.
Jens Peter Henrichsen
President14
According to respondent, the material allegations of the complaint, not petitioners defenses,
determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the
General Conditions of Employment does not provide for an exclusive venue where the complaint
against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that PPI
had adopted two inconsistent positions: it was first alleged that he should have filed his complaint
in Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court
of Arbitration.15
In their reply, petitioners claimed that respondents employer was PCIJ, which had exercised
supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of
Henrichsen under the letterhead of PCIJ in Japan.16 The letter of employment dated January 9, 1998
which respondent relies upon did not bear his (respondents) signature nor that of Henrichsen.
On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners Motion to Dismiss.
The dispositive portion reads:
WHEREFORE, finding merit in respondents Motion to Dismiss, the same is hereby granted. The
instant complaint filed by the complainant is dismissed for lack of merit.
SO ORDERED.17
The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between
respondent and PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld
was required to work under the General Conditions of Employment. PCIJ remained respondents
employer despite his having been sent to the Philippines. Since the parties had agreed that any

differences regarding employer-employee relationship should be submitted to the jurisdiction of

the court of arbitration in London, this agreement is controlling.
On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latters
decision in toto.18
Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the
following arguments:
I
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
AFFIRMED THE LABOR ARBITERS DECISION CONSIDERING THAT:
A. PETITIONERS TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF JAPAN
BUT RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS JURISDICTION OVER
THE INSTANT CASE; AND
B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF THE
NLRC AND NOT THE COURT OF ARBITRATION IN LONDON.
II
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
AFFIRMED THE DISMISSAL OF THE COMPLAINT CONSIDERING THAT PETITIONERS
TERMINATION FROM EMPLOYMENT IS ILLEGAL:
A. THE CLOSURE OF RESPONDENT COMPANYS WATER AND SANITATION SECTOR WAS
NOT BONA FIDE.
B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANYS WATER AND
SANITATION SECTOR WAS JUSTIFIABLE, PETITIONERS DISMISSAL WAS INEFFECTUAL AS
THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) AND PETITIONER WAS NOT
NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED CLOSURE.19
Respondent averred that the absence or existence of a written contract of employment is not
decisive of whether he is an employee of PPI. He maintained that PPI, through its president
Henrichsen, directed his work/duties as Sector Manager of PPI; proof of this was his letter-proposal
to the Development Bank of the Philippines for PPI to provide consultancy services for the
Construction Supervision of the Water Supply and Sanitation component of the World BankAssisted LGU Urban Water and Sanitation Project.20 He emphasized that as gleaned from Alien
Employment Permit (AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999, he is
an employee of PPI. It was PPI president Henrichsen who terminated his employment; PPI also paid
his salary and reimbursed his expenses related to transactions abroad. That PPI is a wholly-owned
subsidiary of PCIJ is of no moment because the two corporations have separate and distinct
personalities.

The CA found the petition meritorious. Applying the four-fold test21 of determining an employeremployee relationship, the CA declared that respondent was an employee of PPI. On the issue of
venue, the appellate court declared that, even under the January 7, 1998 contract of employment,
the parties were not precluded from bringing a case related thereto in other venues. While there
was, indeed, an agreement that issues between the parties were to be resolved in the London Court
of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint cannot be
filed in any other forum other than in the Philippines.
On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of
which reads:
WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby
REVERSED and SET ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for disposition of
the case on the merits.
SO ORDERED.22
A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the
appellate court denied for lack of merit.23
In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:
I
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT RELATIONSHIP
EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION,
EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND WAS MERELY "SECONDED" TO
PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA.
II
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO HAS
JURISDICTION OVER RESPONDENTS CLAIM DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION,
EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE
BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN LONDON."24
Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners
aver that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They
maintain that it is not within the province of the appellate court in a petition for certiorari to review
the facts and evidence on record since there was no conflict in the factual findings and conclusions
of the lower tribunals. Petitioners assert that such findings and conclusions, having been made by
agencies with expertise on the subject matter, should be deemed binding and conclusive. They
contend that it was the PCIJ which employed respondent as an employee; it merely seconded him to
petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner
PPI, being a wholly-owned subsidiary of PCIJ, was never the employer of respondent.

Petitioners assert that the January 9, 1998 letter of employment which respondent presented to
prove his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the
purported parties. They insist that PCIJ paid respondents salaries and only coursed the same
through petitioner PPI. PPI, being its subsidiary, had supervision and control over respondents
work, and had the responsibilities of monitoring the "daily administration" of respondent.
Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to
prove that he was an employee of petitioner PPI because these documents are of doubtful
authenticity.
Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of
PPI, it was he who signed the termination letter of respondent upon instructions of PCIJ. This is
buttressed by the fact that PCIJs letterhead was used to inform him that his employment was
terminated. Petitioners further assert that all work instructions came from PCIJ and that petitioner
PPI only served as a "conduit." Respondents Alien Employment Permit stating that petitioner PPI
was his employer is but a necessary consequence of his being "seconded" thereto. It is not sufficient
proof that petitioner PPI is respondents employer. The entry was only made to comply with the
DOLE requirements.
There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no
jurisdiction over respondents complaint.
Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim
that the principlesof forum non conveniens and lex loci contractus are applicable. They also point
out that the principal office, officers and staff of PCIJ are stationed in Tokyo, Japan; and the contract
of employment of respondent was executed in Tokyo, Japan.
Moreover, under Section 21 of the General Conditions for Employment incorporated in
respondents January 7, 1998 letter of employment, the dispute between respondent and PCIJ
should be settled by the court of arbitration of London. Petitioners claim that the words used
therein are sufficient to show the exclusive and restrictive nature of the stipulation on venue.
Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers,
while the Labor Code of the Philippines applies only to Filipino employers and Philippine-based
employers and their employees, not to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter
do not extend to foreign workers who executed employment agreements with foreign employers
abroad, although "seconded" to the Philippines.25
In his Comment,26 respondent maintains that petitioners raised factual issues in their petition
which are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he
had been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary evidence
which both the Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss his
complaint on the basis of the letter of employment and Section 21 of the General Conditions of
Employment. In contrast, the CA took into account the evidence on record and applied case law
correctly.
The petition is denied for lack of merit.
It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from
reviewing the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A.

No. 7902, the CA is empowered to pass upon the evidence, if and when necessary, to resolve factual
issues.27 If it appears that the Labor Arbiter and the NLRC misappreciated the evidence to such an
extent as to compel a contrary conclusion if such evidence had been properly appreciated, the
factual findings of such tribunals cannot be given great respect and finality.28
Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent
appended to his pleadings showing that he was an employee of petitioner PPI; they merely focused
on the January 7, 1998 letter of employment and Section 21 of the General Conditions of
Employment.
Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said
application, PPI averred that respondent is its employee. To show that this was the case, PPI
appended a copy of respondents employment contract. The DOLE then granted the application of
PPI and issued the permit.
It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the
requirements for the issuance of an employment permit is the employment contract. Section 5, Rule
XIV (Employment of Aliens) of the Omnibus Rules provides:
SECTION 1. Coverage. This rule shall apply to all aliens employed or seeking employment in the
Philippines and the present or prospective employers.
SECTION 2. Submission of list. All employers employing foreign nationals, whether resident or
non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship,
foreign and local address, nature of employment and status of stay in the Philippines.
SECTION 3. Registration of resident aliens. All employed resident aliens shall register with the
Bureau under such guidelines as may be issued by it.
SECTION 4. Employment permit required for entry. No alien seeking employment, whether as a
resident or non-resident, may enter the Philippines without first securing an employment permit
from the Ministry. If an alien enters the country under a non-working visa and wishes to be
employed thereafter, he may only be allowed to be employed upon presentation of a duly approved
employment permit.
SECTION 5. Requirements for employment permit applicants. The application for an employment
permit shall be accompanied by the following:
(a) Curriculum vitae duly signed by the applicant indicating his educational background, his
work experience and other data showing that he possesses technical skills in his trade or
profession.
(b) Contract of employment between the employer and the principal which shall embody
the following, among others:
1. That the non-resident alien worker shall comply with all applicable laws and rules
and regulations of the Philippines;

2. That the non-resident alien worker and the employer shall bind themselves to
train at least two (2) Filipino understudies for a period to be determined by the
Minister; and
3. That he shall not engage in any gainful employment other than that for which he
was issued a permit.
(c) A designation by the employer of at least two (2) understudies for every alien worker.
Such understudies must be the most ranking regular employees in the section or
department for which the expatriates are being hired to insure the actual transfer of
technology.
Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the
following:
(a) Compliance by the applicant and his employer with the requirements of Section 2
hereof;
(b) Report of the Bureau Director as to the availability or non-availability of any person in
the Philippines who is competent and willing to do the job for which the services of the
applicant are desired;
(c) His assessment as to whether or not the employment of the applicant will redound to the
national interest;
(d) Admissibility of the alien as certified by the Commission on Immigration and
Deportation;
(e) The recommendation of the Board of Investments or other appropriate government
agencies if the applicant will be employed in preferred areas of investments or in
accordance with the imperative of economic development.
Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise,
petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are thus
estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of respondent all
along.
We agree with the conclusion of the CA that there was an employer-employee relationship between
petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled that
whenever the existence of an employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employers power to control the employees conduct. It is the
so-called "control test" which constitutes the most important index of the existence of the
employer-employee relationshipthat is, whether the employer controls or has reserved the right
to control the employee not only as to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to
control not only the end to be achieved but also the means to be used in reaching such end.29 We
quote with approval the following ruling of the CA:

[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent
company is the true employer of petitioner. In the case at bar, the power to control and supervise
petitioners work performance devolved upon the respondent company. Likewise, the power to
terminate the employment relationship was exercised by the President of the respondent company.
It is not the letterhead used by the company in the termination letter which controls, but the person
who exercised the power to terminate the employee. It is also inconsequential if the second letter of
employment executed in the Philippines was not signed by the petitioner. An employer-employee
relationship may indeed exist even in the absence of a written contract, so long as the four elements
mentioned in the Mafinco case are all present.30
The settled rule on stipulations regarding venue, as held by this Court in the vintage case of
Philippine Banking Corporation v. Tensuan,31 is that while they are considered valid and
enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth in
Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They should
be considered merely as an agreement or additional forum, not as limiting venue to the specified
place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict
venue, there must be accompanying language clearly and categorically expressing their purpose
and design that actions between them be litigated only at the place named by them.32
In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other
court save ," "particularly," "nowhere else but/except ," or words of equal import were stated
in the contract.33 It cannot be said that the court of arbitration in London is an exclusive venue to
bring forth any complaint arising out of the employment contract.
Petitioners contend that respondent should have filed his Complaint in his place of permanent
residence, or where the PCIJ holds its principal office, at the place where the contract of
employment was signed, in London as stated in their contract. By enumerating possible venues
where respondent could have filed his complaint, however, petitioners themselves admitted that
the provision on venue in the employment contract is indeed merely permissive.
Petitioners insistence on the application of the principle of forum non conveniens must be rejected.
The bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the
application of the principle for the following reasons:
First. The Labor Code of the Philippines does not include forum non conveniens as a ground
for the dismissal of the complaint.34
Second. The propriety of dismissing a case based on this principle requires a factual
determination; hence, it is properly considered as defense.35
Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of
Appeals,36 this Court held that:
x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that
the following requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision
as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to
enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 76563
is AFFIRMED. This case is REMANDED to the Labor Arbiter for disposition of the case on the merits.
Cost against petitioners.

G.R. No. 169835

July 3, 2007

HYATT ELEVATORS AND ESCALATORS CORPORATION, Petitioner,

vs.
LG OTIS ELEVATOR COMPANY, Respondent.
DECISION
GARCIA, J.:
This petition for review under Rule 45 of the Rules of Court seeks to nullify and set aside the
Decision1 dated December 22, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 74320 and its
Resolution2 of September 27, 2005, denying petitioners motion for reconsideration
Petitioner Hyatt Elevators and Escalators Corporation (Hyatt) is a domestic corporation primarily
engaged in the business of selling, installing and maintaining/servicing elevators, escalators and
parking equipment, with address at the 6th Floor, Dao I Condominium, Salved St., Legaspi Village,
Makati, as stated in its Articles of Incorporation. When this case started, Hyatt listed its office
address as located at Hyatt Centre, Ortigas Avenue, Mandaluyong City. Respondent LG Otis Elevator
Company (LG Otis), on the other hand, evolved as a result of a joint venture agreement between LG
Electronics, Inc., of South Korea and Otis Elevator Company of Connecticut, U.S.A.
The facts, as established by the appellate court, are as follows:
It appears that private respondent [herein petitioner] Hyatt Elevators & Escalators Company
(HYATT) was the Philippine distributor until 1997 of elevators and escalators of Lucky Goldstar
International Corporation (LUCKY GOLDSTAR) and Goldstar Industrial Systems, Co. Ltd.
(GOLDSTAR INDUSTRIAL).
Herein petitioner [now herein respondent] LG OTIS Elevator Company (LG OTIS) alleges that it is a
joint venture established on November 22, 1999 by LG Electronics Inc. (LG ELECTRONICS), which is
based in Korea, and Otis Elevator Company (OTIS), which is based in the United States of America.
Otis subsequently transferred its rights and obligations under the LG Otis joint venture to Sirius
(Korea) Limited, which is based in London, England.
LG Otis purchased the business of LG Industrial Systems Co. Ltd. (LGISC), a Korean corporation
which, at the time of said purchase, was the principal stockholder of LG Industrial Systems

Philippines, Inc. (LGISP), a domestic corporation established in 1998. On March 28, 2000, LGISP
changed its name to Goldstar Elevators Philippines, Inc. (GOLDSTAR).
Records show that [in the Regional Trial Court of Mandaluyong City] Hyatt filed a complaint for
unfair trade practices and damages against LGISC and LG International Corporation. It was alleged
in the complaint that defendant LGISC was formerly known as Goldstar Industrial Systems Co., Ltd.
(Goldstar Industrial) and co-defendant LG International Corporation was formerly known as Lucky
Goldstar Industrial Corporation (Lucky Goldstar). Hyatt claimed that after establishing a Philippine
market for defendants elevators and escalators pursuant to a distributorship agreement executed
in 1988, the defendants unfairly committed trade practices intended to establish their own
company, ease out Hyatt and cripple its business operations as the exclusive distributor of LG
elevators, escalators and parking equipment in the Philippines.
An amended complaint was subsequently filed by Hyatt impleading herein petitioner LG Otis. It was
alleged that LG Otis was formerly LGISC and Goldstar Industrial. The amended complaint also
impleaded Goldstar Elevators . which was allegedly formerly known as LG Industrial Systems
Philippines, Inc. (LGISP).
LGISC and LG Industrial Corporation opposed the amended complaint on the ground that LG Otis
should not be substituted to LGISC as the two are separate and distinct corporations, retaining
separate organizations, assets and liabilities. Despite such opposition, the amended complaint was
admitted by the trial court.
Petitioner LG Otis [and Goldstar Elevators] then filed a motion to dismiss the amended complaint
on the grounds that venue was improperly laid, and that the amended complaint fails to state a
cause of action. 3 (Emphasis and words in brackets supplied.)
On May 27, 2002, in Civil Case No. MC-99-600, the Regional Trial Court (RTC) of Mandaluyong City,
Branch 213,4 issued an order5 denying the motion to dismiss separately interposed by respondent
LG Otis and Goldstar Elevators, as defendants a quo.
In another order6 dated October 1, 2002, the Mandaluyong RTC denied Goldstar Elevators and
respondent LG Otis separate motions for reconsideration.
Therefrom, both Goldstar Elevators and respondent LG Otis went to the CA via separate petitions
for certiorari under Rule 65 of the Rules of Court, Goldstar Elevators recourse docketed as CA-G.R.
SP No. 74319 and that of respondent LG Otis, as CA-G.R. SP No. 74320.7 CA-G.R. SP No. 74319 was
raffled to the 6th Division of the appellate court, while CA-G.R. SP No. 74320 went to its Special
Fourth Division
In its Decision dated June 26, 2003, in CA-G.R. SP No. 74319, as reiterated in a Resolution of
November 27, 2003, the CA set aside the May 27, 2002 and October 1, 2002 Orders of the RTC of
Mandaluyong City. The decretal portion of the CA Decision reads:
WHEREFORE, in view of the foregoing, the assailed Orders dated May 27, 2002 and October 1, 2002
of the RTC, Branch 213, Mandaluyong City in Civil Case No. 99-600, are hereby SET ASIDE. The said
case is hereby ordered DISMISSED on the ground of improper venue. (Emphasis added.)

Hyatt would subsequently appeal the CAs decision and resolution in CA-G.R. SP No. 74319 to this
Court, but failed to secure a favorable disposition. For by Decision8 dated October 24, 2005, in G.R.
No. 161026, entitled "Hyatt Elevators and Escalators Corporation v. Goldstar Elevators, Phil., Inc.,"
the Court affirmed the said assailed CA decision and ruling.
As in CA-G.R. SP No. 74319, the appellate court, in CA-G.R. SP No. 74320, also ruled against herein
petitioner HYATT, as respondent therein, and for LG Otis, albeit for reasons in addition to the issue
of improper venue. The fallo of the CAs Decision9 dated December 22, 2003 in CA-G.R. SP No.
74320 which, together with its Resolution10 of September 27, 2005 denying reconsideration
thereof, is subject of this recourse, reads, as follows:
WHEREFORE, based on the foregoing premises, the instant petition is hereby GRANTED.
Consequently, the assailed May 27, 2002 and October 1, 2002 Orders of the Regional Trial Court of
Mandaluyong City in Civil Case No. MC-99-600 are REVERSED and SET ASIDE.
SO ORDERED.
In this recourse, petitioner urges the reversal of the assailed CA decision and resolution, raising the
following issues:
1. WHETHER OR NOT THE [CA], IN REVERSING THE DECISION OF THE REGIONAL TRIAL
COURT, ERRED AS A MATTER OF LAW AND JURISPRUDENCE, AS WELL AS COMMITTED
GRAVE ABUSE OF DISCRETION, IN HOLDING THAT IN THE LIGHT OF THE PECULIAR
FACTS OF THIS CASE, VENUE WAS IMPROPER;
2. WHETHER OR NOT THE [CA], IN REVERSING THE DECISION OF THE [RTC], ERRED AS A
MATTER OF LAW AND JURISPRUDENCE, AS WELL AS COMMITTED GRAVE ABUSE OF
DISCRETION, IN HOLDING THAT IN THE LIGHT OF THE PECULIAR FACTS OF THIS CASE,
RESPONDENT COULD NOT BE SUED IN THE PHILIPPINES AS A SUCCESSOR-IN-INTEREST
OF LG INDUSTRIAL SYSTEMS CO. SIMPLY BECAUSE IT IS NOT DOING BUSINESS IN THE
PHILIPPINES.11 (Words in brackets added.)
We DENY.
As may be noted, G.R. No. 161026 and this case involve virtually the same parties and sprang from
one and the same Civil Case No. MC-99-600, a suit for unfair trade practices instituted by petitioner
Hyatt against respondent LG Otis and Goldstar Elevators and eventually disposed of by the
Mandaluyong RTC. In fine, G.R. No. 161026 and this case are cast against the same factual and legal
settings, save perhaps for the fact that respondent in the former case is a domestic corporation,
while the instant case has as respondent a foreign corporation. And as contextually abundantly
made clear in G.R. No. 161026, petitioner Hyatt could not successfully initiate a civil suit, like Civil
Case No. MC-99-600, in Mandaluyong City, its place of business, as stated in its Articles of
Incorporation, being in Makati City. As explained by the Court in its Decision in G.R. No. 161026:
x x x Admittedly, the latters principal place of business is Makati, as indicated in its Articles of
Incorporation. Since the principal place of business of a corporation determines its residence or
domicile, then the place indicated in petitioners [Hyatts] articles of incorporation becomes
controlling in determining the venue for this case.

Petitioner [Hyatt] argues that the Rules of Court do not provide that when the plaintiff is a
corporation, the complaint should be filed in the location of its principal office as indicated in its
articles of incorporation. Jurisprudence has, however, settled that the place where the principal
office of a corporation is located, as stated in the articles, indeed establishes its residence. This
ruling is important in determining the venue of an action by or against a corporation, as in the
present case.
Without merit is the argument of petitioner [Hyatt] that the locality stated in its Articles of
Incorporation does not conclusively indicate that its principal office is still in the same place. We
agree with the appellate court in its observation that the requirement to state in the articles the
place where the principal office of the corporation is to be located "is not a meaningless
requirement. That proviso would be rendered nugatory if corporations were to be allowed to
simply disregard what is expressly stated in their Articles of Incorporation."
Inconclusive are the bare allegations of petitioner [Hyatt] that it had closed its Makati office and
relocated to Mandaluyong City, and that respondent [Goldstar Elevators] was well aware of those
circumstances. Assuming arguendo that they transacted business with each other in the
Mandaluyong office of petitioner [Hyatt], the fact remains that, in law, the latters residence was still
the place indicated in its Articles of Incorporation. Further unacceptable is its faulty reasoning that
the ground for the CAs dismissal of its Complaint was its failure to amend its Articles of
Incorporation so as to reflect its actual and present principal office. The appellate court was clear
enough in its ruling that the Complaint was dismissed because the venue had been improperly laid,
not because of the failure of petitioner to amend the latters Articles of Incorporation.12 (Words in
brackets and emphasis added.)1avvphi1
In the light of the foregoing considerations, the challenged dismissal of Civil Case No. MC-99-600, as
ordered in the assailed judgment of the CA, on the ground of improper venue, is correct. The Court
will even go further and apply its Decision in G.R. No. 161026 as the law of the case with respect to
Hyatt on the issue of venue. Whatever is once irrevocably established as the controlling legal rule or
decision between the same parties in the same case continues to be the law of the case so long as
the facts on which such decision was predicated continue to be the facts of the case before the
court.13 With the view we take of this case, the factual milieu upon which the Decision in G.R. No.
161026 was based has remained unchanged to justify the application of the salutary law of the case
principle.
Given the above perspective, the second issue of whether or not foreign-based respondent LG Otis,
as alleged successor-in-interest of a domestic corporation, could be sued in the country need not
detain the Court further. For, the matter of suability would, in final reckoning, really have no
bearing on the dismissal of a suit on the ground of improper venue. And besides, the second issue
raised would require the Court to delve into certain unresolved factual questions and assumptions.
Needless to stress, such exercise is beyond the purview of the Courts power of review on certiorari.
WHEREFORE, the petition is DENIED. The appealed Decision and Resolution of the CA in CA-G.R. SP
No. 74320 are AFFIRMED, and Civil Case No. MC-99-600 is DISMISSED without prejudice.
Costs against the petitioner.
SO ORDERED.

G.R. No. 95631 October 28, 1991

METALS ENGINEERING RESOURCES CORPORATION, petitioner,
vs.
COURT OF APPEALS and PLARIDEL JOSE, respondents.
King, Capuchino, Tan & Associates for petitioner.
Fortunato M. Lira for private respondent.

REGALADO, J.:p
Impugned in this petition for review on certiorari is the decision of respondent Court of Appeals,
dated August 9, 1990, 1 dismissing the special civil action for certiorari and prohibition filed therein
by petitioner corporation.
The appeal herein arose from Civil Case No. 55560 filed by petitioner corporation against private
respondent Plaridel Jose, for the annulment of an agreement to buy and sell executed between the
parties, before the Regional Trial Court of Pasig, Branch 160, the complaint 2 alleging, inter
alia, that:
xxx xxx xxx
2. On October 31, 1987, plaintiff and defendant executed a document which was
denominated as an "Agreement to Buy and Sell" in which plaintiff offered to sell to
the defendant and the latter in turn agreed to buy several parcels of land with an
aggregate area of 6,135 sq. m. . . .
xxx xxx xxx
4. The "Agreement to Buy and Sell", oil its face, is patently and plainly imperfect and
incomplete as there was and could have been no meeting of the minds of the parties
in regard to the manner, period and terms of payment of the purchase price or
consideration which is undeniably an essential element of the contract.
Consequently, the subject "Agreement", not having been perfected and completed,
did not contemplate nor did it result to a binding and enforceable contract to sell. In
fact, as stipulated in paragraphs 3 and 4 of said "agreement", the terms of sale,
including the payment of the purchase price, are uncertain and imperfect as they are
subject to the following:
a) Defendant's obligation to pay one half (1/2) of the total
consideration is conditioned and depends exclusively on the ability
of the plaintiff to "look for a place to transfer its offices and plants

from the land subject hereof within One hundred twenty days" but
should plaintiff "fail to locate a place to transfer its offices and plants
from the land subject hereof within the said one hundred and twenty
days "the agreement is merely subject to an "extension" upon terms
and conditions to be determined and agreed upon separately and
subsequently; and
b) The payment of the remaining fifty percent (50%) thereof SHALL
BE THE SUBJECT OF A (ANOTHER) SEPARATE AGREEMENT to be
made between the parties together with the execution of a Deed of
Absolute Sale.
5. Despite the fact that the subject "agreement" had not yet been perfected and
completed, defendant prematurely caused the preparation of a subdivision plan of
the lands into several sub-lots and offered the same for sale to the public through an
advertisement published in the issue of the "Manila Bulletin" on November 25, 1987
...
6. Thus, on December 24, 1987, plaintiff wrote a letter to defendant rescinding
and/or withdrawing from the uncompleted and imperfect "Agreement" and
tendered a check for the amount of P50,000.00 representing full refund of the
earnest money previously delivered by defendant pursuant to paragraph 2 of said
agreement but defendant refused to accept the same.
xxx xxx xxx
8. The refusal of defendant to acnowledge the imperfection and non-completion of
the "Agreement" and to accept the refund P50.000.00 as well as his acts of offering
the land for sale to third person and his annotation of adverse claims in the title
covering the lands are unjustifiable and great damage and prejudice to plaintiff.
xxx xxx xxx
Private respondent filed his Answer with Counterclaim 3 alleging a compulsory counterclaim on
the following operative facts:
12. Defendant had already spent a considerable amount for the subdivision of the
subject properties into smaller parcels of land for resale to a group of buyers, for the
advertisements and promotion necessary thereto, and other related expenses;
13. One of the pertinent provisions of the AGREEMENT (Annex "A") is the schedule
of payments to be paid by the defendant which provides as follows:
3. Within one hundred and twenty (120) days from the execution of
this agreement, the VENDOR shall look for a place to transfer its
offices and plant from the land subject hereof. And once a place to
transfer is found, the VENDOR shall inform the VENDEE of the same.
Within fifteen (15) days from such notice of the VENDOR to the
VENDEE, the latter shall immediately pay, without need of demand

and further notice, to the former one-half (1/2) of the total purchase
price of the land . . .
Due to the adamant and unreasonable posture of the plaintiff, defendant's timetable
to generate funds and profits was severely stalled and placed at a standstill to the
damage and prejudice of his investment and financial projection, which can only be
rectified or compensated by way of tacking into, and thus extending the agreed
period to pay the said-one-half (1/2) of the purchase price, the length of time from
plaintiffs notice to rescind (Annex "1") until defendant complies with its part of the
AGREEMENT (Annex "A") whether voluntarily, by compromise, or by judicial
compulsion;
14. Defendant suffered further due to the fact that his reputation has been tarnished
at the very least considering that he could not pursue his legal and business
commitment with those who have already transacted with him over the subject
parcels of land;
15. By reason of the present unfounded and malicious action filed by the plaintiff,
defendant suffered sleepless nights, serious anxieties, embarrassment and similar
injuries due to the indefensible and destructive posture of the plaintiff for which he
should be awarded P300,000.00 at least in moral damages;
16. Due to the patent, wanton and gross bad faith displayed by the plaintiff in its
dealings with the defendant, the latter should be awarded at least P100,000.00 in
exemplary damages likewise to be assessed against the plaintiff;
17. By reason of the present suit, defendant was furthermore forced to hire the
services of counsel to protect his rights and interest under the premises, in the
amount of P100,000.00 as and for attorney's fees aside from the expenses and cost
of litigation which shall be proved at the trial hereof.
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of the
defendant dismissing the Complaint and declaring the AGREEMENT (Annex "AComplaint") with the defendant valid for all legal intents and purposes and ordering
the plaintiff to honor its provisions except the term or period of payment of the first
one-half (1/2) of the purchase price, which should be extended by tacking into the
15-day period the length of time mentioned under paragraph 13 hereof; and for the
damages, plaintiff be ordered to pay defendant the following:
a) P300,000.00 in moral damages for the bersmirched reputation, embarrassment,
anguish, anxieties, sleepless nights, and similar injuries suffered by the defendant
due to the gross and wanton bad faith of the plaintiff;
b) P100,000.00 in exemplary damages so that others who similarly inclined to do as
what the plaintiff did against the defendant, should properly be forewarned and
deterred therefrom;
c) P100,000.00 as and for attorney's fees plus the expenses of litigation proved at
the trial; and

d) Costs."
Before the case could be heard on pre-trial, private respondent filed a Motion to Expunge the
Complaint on the ground that the same did not specify the amount of damages sought either in the
body or in the prayer of the complaint, citing in support thereof the then ruling case of Manchester
Development Corporation, et al. vs. Court of Appeals, et al. 4 and Administrative Circular No. 7 issued
by this Court on March 4, 1988.
In an Order dated December 15, 1988, the trial court required petitioner to amend its complaint by
specifying the amount of damages prayed for, otherwise the original complaint shall be dismissed.
In compliance therewith, petitioner filed its Amended Complaint specifying the amount of damages
it seeks to recover from private respondent.
However, private respondent moved for the reconsideration of the trial court's aforesaid order with
respect to the portion allowing petitioner to file an amended complaint, stating that the court did
not acquire jurisdiction when the wrong docket fee was paid, hence the amendment of the
complaint did not vest jurisdiction upon the court; and that for all legal intents and purposes, no
original complaint was filed which could be the subject of an amendment.
Acting thereon, on April 12, 1989, the trial court issued an Order 5 granting the motion for
reconsideration and ordering that the complaint be expunged from the record on the ground that it
did not acquire jurisdiction over the case.
Private respondent then filed a Motion to Set Case for Presentation of Evidence in support of his
counterclaim. In its Opposition, petitioner averred that since private respondent's counterclaim is
compulsory in nature because it is necessarily connected with and arose out of the same
transaction subject of the complaint, with the dismissal of petitioner's complaint the compulsory
counterclaim can no longer remain pending for independent adjudication; and considering further
that since petitioner had re-filed its complaint against private respondent on May 3, 1989 before
the Regional Trial Court of Pasig, Branch 168, docketed therein as Civil Case No. 58126, then private
respondent could easily set up the same compulsory counterclaim in said later case.
Thereafter, the court a quo issued an Order, 6 dated June 20, 1989, granting private respondent's
motion to present evidence and holding that "a) compulsory counterclaim is a complaint in itself;
that it is a complaint against the plaintiff; that it is independent in character. It has to be set up in
the answer otherwise it will be waived or barred and it cannot be invoked in another case, for it
would be splitting a cause of action which is not allowed under the rules." It added that herein
private respondent "correctly insisted that the compulsory counterclaim should be prosecuted
now, otherwise he cannot invoke his claim in a separate proceeding because he will be "barred by
the dismissal" of the instant case."i
Petitioner filed a Motion for Reconsideration of said order alleging that a compulsory counterclaim
is essentially ancillary to the main controversy and that, assuming that private respondent's
counterclaim can remain pending for independent trial, the same would nevertheless be dismissed
for non-payment of any docket fees on the total amount of the counterclaim. Private respondent
filed his Opposition at the same time attaching thereto a receipt for the payment of docket fees. In
reply, petitioner contended that the belated payment of the docket fees for the counterclaim does
not have the effect of vesting the trial court with jurisdiction over the counterclaim. The motion for
reconsideration was denied by the trial court in its Order 7 dated September 29, 1989.

From said order, petitioner filed a special civil action for and certiorari prohibition with prayer for
preliminary injunction and/or temporary restraining order with respondent Court of Appeals. Its
contentions for the allowance thereof may be capsulized as follows:
1. Respondent court acted without or in excess of its jurisdiction and gravely abused
his discretion in granting respondent Jose's motion to present evidence on his
compulsory counterclaim:
a. The dismissal of the complaint carries with it the dismissal of the compulsory
counterclaim.
b. Even assuming that respondent Jose's counterclaim may remain pending for
adjudication independently of the principal complaint, it should still be dismissed
for failure on the part of respondent to pay docket fees thereon.
2. Great or irreparable injury and injustice would result to petitioner if respondent
Jose should be allowed to present evidence ex parte on his counterclaim pursuant to
respondent court's order September 29, 1989. 8
Respondent court, in its questioned decision, dismissed the special civil action for certiorari, stating
that since the order is merely interlocutory in nature and that at most it is merely an error of
judgment, it cannot be corrected bycertiorari, thus:
It is obvious that no jurisdictional error is involved in this case. If to allow the
respondent to present evidence in support of his counterclaim is a mistake, it is at
most an error of judgment that is not correctible by certiorari or prohibition. Such
an error can be corrected in an appeal which may be taken from the judgment to be
rendered on the counterclaim (Fernando vs. Vasquez, 31 SCRA 288).
Time and again, it has been said that the function of certiorari and prohibition is to
keep an inferior court within the limits of its jurisdiction (Enriquez vs. Rivera, 90
SCRA 641). These two extraordinary writs are not intended to correct every error
which may be committed in the course of a trial.
Finally, the order sought to be annulled is interlocutory in nature which again
cannot be corrected bycertiorari (Perez vs. Moneta Board, 20 SCRA 592; Layag vs.
Gerardo, 10 SCRA 837). 9
Its motion for reconsideration having been denied, petitioner filed the instant petition.
Petitioner avers that respondent Court of Appeals gravely erred (1) in finding that no jurisdictional
defect was committed by the trial court in issuing the order date June 20, 1989 allowing respondent
Jose to present evidence in support of his compulsory counterclaim despite the dismissal of the
complaint; and (2) in holding that the order of June 20, 1989 cannot be the basis of a petition
for certiorari and prohibition. 10
We find for petitioner.

Private respondent's asseveration that a compulsory counterclaim is not deemed dismissed just
because the main complaint is dismissed by the court, and that the same has to be pursued
otherwise it will forever be barred on the ground of res judicata, is at most specious and should be
struck down for lack of merit.
There is no dispute that private respondent's counterclaim is compulsory in nature since (1) it
arises out of, or is necessarily connected with the transaction or occurrence that is the subject
matter of the opposing party's claim; 2) it does not require for its adjudication the presence of third
parties over whom the court cannot acquire jurisdiction; and 3) the court has jurisdiction to
entertain the claim. And the rule is that a compulsory counterclaim not set up shall be barred 11 if
not raised on time and the party in error is precluded from setting it up in a subsequent litigation
on the ground ofres judicata, the theory being that what are barred by prior judgment are not only
the matters actually raised and litigated upon, but also such matters as could have been raised but
were not. 12 In other words, a compulsory counterclaim cannot be made the subject of a separate
action but should be asserted in the same suit involving the same transaction or occurrence giving
rise to it. Where the counterclaim is made the subject of a separate suit, it may be abated upon a
plea of auter action pendant or litis pendentia, and/or dismissed on the ground of res judicata.13
However, such is not the situation obtaining in the present action. In the petition before us, private
respondent, in his responsive pleading which is aptly titled "Answer with Counterclaim," has
properly raised a counterclaim against herein petitioner's claim that the agreement to buy and sell
is imperfect and incomplete. Ironically, the insistence of private respondent in proceeding with the
trial of the case is premised on the very existence of his counterclaim. Hence, there can be no res
judicata to speak of because a counterclaim was correctly invoked against herein petitioner's
complaint. In fine, what private respondent is in effect saying is that his counterclaim should be
allowed to proceed independently of the main action.
For all intents and purposes, such proposition runs counter to the nature of a compulsory
counterclaim in that it cannot remain pending for independent adjudication by the court. 14 This is
because a compulsory counterclaim is auxiliary to the proceeding in the original suit 15 and derives
its jurisdictional support therefrom, 16 inasmuch as it arises out of or is necessarily connected with
the transaction or occurrence that is the subject matter of the complaint. It follows that if the court
does not have jurisdiction to entertain the main action of the case and dismisses the same, then the
compulsory counterclaim, being ancillary to the principal controversy, must likewise be
dismissed 17 since no jurisdiction remained for any grant of relief under the counterclaim. 18
The aforementioned doctrine is in consonance with the primary objective of a counterclaim which
is to avoid and prevent circuity of action by allowing the entire controversy between the parties to
be litigated and finally determined in one action, wherever this can be done with entire justice to all
parties before the court. 19 The philosophy of the rule is to discourage multiplicity of suits. 20 It
will be observed that the order of the trial court allowing herein private respondent to proceed wit
the presentation of his evidence in support of the latter's counterclaim is repugnant to the very
purpose and intent of the rule on counterclaims.
Furthermore, it has been held that a counterclaim presupposes the existence of a claim against the
party filing the counterclaim. Where there is no claim against the counterclaimant, then the
counterclaim is improper and should be dismissed. 21 The complaint filed by herein petitioner was
dismissed on the ground of lack of jurisdiction for non-payment of docket fees. By reason of said
dismissal, it is as if no claim was filed against herein private respondent, hence the counterclaim

has no leg to stand on. In addition, it was at the instance of private respondent that the complaint
was dismissed. In the words of Justice Abad Santos, "(private respondent) does not object to the
dismissal of the civil case but nonetheless wants (his) counterclaim therein to subsist. Impossible. A
person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the
counterclaim filed therein." 22
American jurisprudence similarly rules that in an action where defendant's answer set up a
counterclaim, the court was without authority to sever the causes of action by dismissing the
complaint and submitting the counterclaim to the jury, although the order of dismissal purported to
be without prejudice to the merits of plaintiff's cause of action upon another trial. 23 This is so
because a severance for trial of a claim or counterclaim may increase the possibility of inconsistent
verdicts and decrease the ability of the court to resolve such inconsistencies without granting a retrial in one or both causes. 24
In the case before us, severing herein private respondent's counterclaim to compel petitioner to
honor the purchase agreement executed between them, from petitioner's action to declare null and
void the same contract, may result in the following outcomes:
1) If the same judgment would be rendered in Civil Case No. 55560 (on the counterclaim) and Civil
Case No. 58126 (on the main action which was re-filed) either for the validity or nullification of the
contract, then there would plausibly be no problem.
2) However, should different and conflicting decisions be handed down in the two cases, which is
not an impossibility, then this will only serve to complicate the issues that will arise and the
remedies that may be necessitated.
Verily, practical considerations of consistency and economy likewise command a trial of the
counterclaim jointly and concurrently with the principal controversy. At any rate, considering that
petitioner has re-filed its complaint involving the same cause of action which is now pending before
another branch of the court, there is nothing to prevent private respondent from raising the same
counterclaim for adjudication in the subsequent action.
It is the submission of herein petitioner that assuming arguendo that the counterclaim can proceed
independently of the main action, the court did not acquire jurisdiction thereover for failure of
private respondent to pay the corresponding docket fees. Petitioner maintains that the ruling
in Manchester should likewise apply to compulsory counterclaims. The argument is incorrect. The
rules regarding payment of docket fees have been summarized in a subsequent case 25 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 rule, therefore is made to apply specifically to permissive counterclaims only, thereby
excluding compulsory counterclaims from its purview. 26 This is because there is no need to pay
docketing fees for a compulsory counterclaim. 27
Finally, we do not ascribe to respondent court's declaration that the order of dismissal issued by
the trial court is merely interlocutory and, at most, an error of judgment which is not correctible
by certiorari and prohibition. As earlier stated, the trial court acted without jurisdiction in
proceeding with the hearing on the counterclaim after it had dismissed the complaint to which the
counterclaim attached. It is precisely to correct the lower court when in the course of proceedings it
acts without jurisdiction or in excess thereof or if the trial judge otherwise acted with grave abuse
of discretion that the extraordinary writ of certiorari or prohibition is afforded to parties as a relief.
Such a relief is available even in respect to interlocutory orders. 28
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and judgment is
hereby rendered DISMISSING the compulsory counterclaim of private respondent in Civil Case No.
55560, without prejudice to the setting up of the same in Civil Case No. 58126, both of the Regional
Trial Court of Pasig, Metro Manila.
SO ORDERED

G.R. No. 133119

August 17, 2000

FINANCIAL BUILDING CORPORATION, petitioner,

vs.
FORBES PARK ASSOCIATION, INC., respondent.
DECISION
DE LEON, JR., J.:
Before us is petition for review on certiorari of the Decision1 dated March 20, 1998 of the Court of
Appeals2 in CA-GR CV No. 48194 entitled "Forbes Park Association, Inc. vs. Financial Building
Corporation", finding Financial Building Corporation (hereafter, Financial Building) liable for
damages in favor of Forbes Park Association, Inc. (hereafter, Forbes Park), for violating the latters
deed of restrictions on the construction of buildings within the Forbes Park Village, Makati.
The pertinent facts are as follows:
The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square
meter residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On December
2, 1985, the USSR engaged the services of Financial Building for the construction of a multi-level
office and staff apartment building at the said lot, which would be used by the Trade Representative
of the USSR.3 Due to the USSRs representation that it would be building a residence for its Trade
Representative, Forbes Park authorized its construction and work began shortly thereafter.

On June 30, 1986, Forbes Park reminded the USSR of existing regulations4 authorizing only the
construction of a single-family residential building in each lot within the village. It also elicited a
reassurance from the USSR that such restriction has been complied with.5 Promptly, the USSR gave
its assurance that it has been complying with all regulations of Forbes Park.6 Despite this, Financial
Building submitted to the Makati City Government a second building plan for the construction of a
multi-level apartment building, which was different from the first plan for the construction of a
residential building submitted to Forbes Park.
Forbes Park discovered the second plan and subsequent ocular inspection of the USSRs subject lot
confirmed the violation of the deed of restrictions. Thus, it enjoined further construction work. On
March 27, 1987, Forbes Park suspended all permits of entry for the personnel and materials of
Financial Building in the said construction site. The parties attempted to meet to settle their
differences but it did not push through.
Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro
Manila, a Complaint7for Injunction and Damages with a prayer for Preliminary Injunction against
Forbes Park docketed as Civil Case No. 16540. The latter, in turn, filed a Motion to Dismiss on the
ground that Financial Building had no cause of action because it was not the real party-in-interest.
On April 28, 1987, the trial court issued a writ of preliminary injunction against Forbes Park but the
Court of Appeals nullified it and dismissed the complaint in Civil Case No. 16540 altogether. We
affirmed the said dismissal in our Resolution,8 promulgated on April 6, 1988, in G.R. No. 79319
entitled "Financial Building Corporation, et al. vs. Forbes Park Association, et al."
After Financial Buildings case, G.R. No. 79319, was terminated with finality, Forbes Park sought to
vindicate its rights by filing on October 27, 1989 with the Regional Trial Court of Makati a
Complaint9 for Damages, against Financial Building, docketed as Civil Case No. 89-5522, arising
from the violation of its rules and regulations. The damages claimed are in the following amounts:
(a) P3,000,000.00 as actual damages; (b) P1,000,000.00 as moral damages; (c) P1,000,000.00 as
exemplary damages; and (d) P1,000,000.00 as attorneys fees.10 On September 26, 1994, the trial
court rendered its Decision11 in Civil Case No. 89-5522 in favor of Forbes Park and against Financial
Building, the dispositive portion of which reads, to wit:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff
and against the defendant:
(1) Ordering the defendant to remove/demolish the illegal structures within three (3)
months from the time this judgment becomes final and executory, and in case of failure of
the defendant to do so, the plaintiff is authorized to demolish/remove the structures at the
expense of the defendant;
(2) Ordering the defendant to pay damages, to wit:
(a) P3,000,000.00 as actual damages by way of demolition expenses;
(b) P1,000,000.00 as exemplary damages;
(c) P500,000.00 as attorneys fees;

(d) the costs of suit.

SO ORDERED."
Financial Building appealed the said Decision of the trial court in Civil Case No. 89-5522 by way of a
petition for review on certiorari12 entitled "Financial Building Corporation vs. Forbes Park
Association, Inc." to the Court of Appeals and docketed therein as CA-GR CV No. 48194. However,
the Court of Appeals affirmed it in its Decision13 dated March 20, 1998, the dispositive portion of
which reads:
"WHEREFORE, the Decision dated September 26, 1994 of the Regional Trial Court of Makati is
AFFIRMED with the modification that the award of exemplary damages, as well as attorneys fees, is
reduced to fifty thousand pesos (P50,000.00) each."
Hence, this petition, wherein Financial Building assigns the following errors:
I. "THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED
BY RESPONDENT FPA DESPITE THE FACT THAT ITS ALLEGED CLAIMS AND CAUSES OF
ACTION THEREIN ARE BARRED BY PRIOR JUDGMENT AND/OR ARE DEEMED WAIVED FOR
ITS FAILURE TO INTERPOSE THE SAME AS COMPULSORY COUNTERCLAIMS IN CIVIL CASE
NO. 16540;
II. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED
BY RESPONDENT FPA AGAINST PETITIONER FBC SINCE RESPONDENT FPA HAS NO CAUSE
OF ACTION AGAINST PETITIONER FBC;
III. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES IN FAVOR OF
RESPONDENT FPA DESPITE THE FACT THAT ON THE BASIS OF THE EVIDENCE ON
RECORD, RESPONDENT FPA IS NOT ENTITLED THERETO AND PETITIONER FBC IS NOT
LIABLE THEREFOR;
IV. THE COURT OF APPEALS ERRED IN ORDERING THE DEMOLITION OF THE ILLEGAL
STRUCTURES LOCATED AT NO. 10 NARRA PLACE, FORBES PARK, MAKATI CITY,
CONSIDERING THAT THE SAME ARE LOCATED ON DIPLOMATIC PREMISES"14
We grant the petition.
First. The instant case is barred due to Forbes Parks failure to set it up as a compulsory
counterclaim in Civil Case No. 16540, the prior injunction suit initiated by Financial Building
against Forbes Park.
A compulsory counterclaim is one which arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the opposing partys claim.15 If it is within the
jurisdiction of the court and it does not require for its adjudication the presence of third parties
over whom the court cannot acquire jurisdiction, such compulsory counterclaim is barred if it is not
set up in the action filed by the opposing party.16
Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead be
asserted in the same suit involving the same transaction or occurrence, which gave rise to it.17 To

determine whether a counterclaim is compulsory or not, we have devised the following tests: (1)
Are the issues of fact or law raised by the claim and the counterclaim largely the same? (2)
Would res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim
rule? (3) Will substantially the same evidence support or refute plaintiffs claim as well as the
defendants counterclaim? and (4) Is there any logical relation between the claim and the
counterclaim? Affirmative answers to the above queries indicate the existence of a compulsory
counterclaim.18
Undoubtedly, the prior Civil Case No. 16540 and the instant case arose from the same occurrence
the construction work done by Financial Building on the USSRs lot in Forbes Park Village. The
issues of fact and law in both cases are identical. The factual issue is whether the structures erected
by Financial Building violate Forbes Parks rules and regulations, whereas the legal issue is whether
Financial Building, as an independent contractor working for the USSR, could be enjoined from
continuing with the construction and be held liable for damages if it is found to have violated
Forbes Parks rules.
As a result of the controversy, Financial Building seized the initiative by filing the prior injunction
case, which was anchored on the contention that Forbes Parks prohibition on the construction
work in the subject premises was improper. The instant case on the other hand was initiated by
Forbes Park to compel Financial Building to remove the same structures it has erected in the same
premises involved in the prior case and to claim damages for undertaking the said construction.
Thus, the logical relation between the two cases is patent and it is obvious that substantially the
same evidence is involved in the said cases.
Moreover, the two cases involve the same parties. The aggregate amount of the claims in the instant
case is within the jurisdiction of the regional trial court, had it been set up as a counterclaim in Civil
Case No. 16540. Therefore, Forbes Parks claims in the instant case should have been filed as a
counterclaim in Civil Case No. 16540.
Second. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing compulsory
counterclaim at that time is now barred.
A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom.19 A counterclaim presupposes the existence of a claim against the
party filing the counterclaim. Hence, where there is no claim against the counterclaimant, the
counterclaim is improper and it must dismissed, more so where the complaint is dismissed at the
instance of the counterclaimant.20 In other words, if the dismissal of the main action results in the
dismissal of the counterclaim already filed, it stands to reason that the filing of a motion to dismiss
the complaint is an implied waiver of the compulsory counterclaim because the grant of the motion
ultimately results in the dismissal of the counterclaim.
Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are
incompatible remedies.1wphi1 In the event that a defending party has a ground for dismissal and a
compulsory counterclaim at the same time, he must choose only one remedy. If he decides to file a
motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his compulsory
counterclaim, he may still plead his ground for dismissal as an affirmative defense in his
answer.21 The latter option is obviously more favorable to the defendant although such fact was lost
on Forbes Park.

The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of
action. There was no need to plead such ground in a motion to dismiss or in the answer since the
same was not deemed waived if it was not pleaded.22 Nonetheless, Forbes Park still filed a motion to
dismiss and thus exercised bad judgment in its choice of remedies. Thus, it has no one to blame but
itself for the consequent loss of its counterclaim as a result of such choice.
Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for
being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes
Park to interpose the same under the rule on compulsory counterclaims, there is no need to discuss
the other issues raised by the herein petitioner.
WHEREFORE, the instant petition is hereby GRANTED and the Decision dated March 20, 1998 of
the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET ASIDE.
Costs against respondent Forbes Park Association, Inc. .
SO ORDERED.

G.R. No. 170354

June 30, 2006

EDGARDO PINGA, Petitioner,

vs.
THE HEIRS OF GERMAN, SANTIAGO represented by FERNANDO SANTIAGO, Respondents.
DECISION
TINGA, J.:
The constitutional faculty of the Court to promulgate rules of practice and procedure1 necessarily
carries the power to overturn judicial precedents on points of remedial law through the
amendment of the Rules of Court. One of the notable changes introduced in the 1997 Rules of Civil
Procedure is the explicit proviso that if a complaint is dismissed due to fault of the plaintiff, such
dismissal is "without prejudice to the right of the defendant to prosecute his counterclaim in the
same or in a separate action."2 The innovation was instituted in spite of previous jurisprudence
holding that the fact of the dismissal of the complaint was sufficient to justify the dismissal as well
of the compulsory counterclaim.3
In granting this petition, the Court recognizes that the former jurisprudential rule can no longer
stand in light of Section 3, Rule 17 of the 1997 Rules of Civil Procedure.
The relevant facts are simple enough. Petitioner Eduardo Pinga was named as one of two
defendants in a complaint for injunction4 filed with Branch 29 of the Regional Trial Court (RTC)5 of
San Miguel, Zamboanga del Sur, by respondent Heirs of German Santiago, represented by Fernando
Santiago. The Complaint6 dated 28 May 1998 alleged in essence that petitioner and co-defendant
Vicente Saavedra had been unlawfully entering the coco lands of the respondent, cutting wood and

bamboos and harvesting the fruits of the coconut trees therein. Respondents prayed that petitioner
and Saavedra be enjoined from committing "acts of depredation" on their properties, and ordered
to pay damages.
In their Amended Answer with Counterclaim,7 petitioner and his co-defendant disputed
respondents ownership of the properties in question, asserting that petitioners father, Edmundo
Pinga, from whom defendants derived their interest in the properties, had been in possession
thereof since the 1930s.8 They alleged that as far back as 1968, respondents had already been
ordered ejected from the properties after a complaint for forcible entry was filed by the heirs of
Edmundo Pinga. It was further claimed that respondents application for free patent over the
properties was rejected by the Office of the President in 1971. Defendants in turn prayed that
owing to respondents forcible re-entry in the properties and the irresponsible and reckless filing of
the case, they be awarded various types of damages instead in amounts totaling P2,100,000 plus
costs of suit.9
By July of 2005, the trial of the case had not yet been completed. Moreover, respondents, as
plaintiffs, had failed to present their evidence. It appears that on 25 October 2004, the RTC already
ordered the dismissal of the complaint after respondents counsel had sought the postponement of
the hearing scheduled then.10 However, the order of dismissal was subsequently reconsidered by
the RTC in an Order dated 9 June 2005, which took into account the assurance of respondents
counsel that he would give priority to that case.11
At the hearing of 27 July 2005, plaintiffs counsel on record failed to appear, sending in his stead a
representative who sought the postponement of the hearing. Counsel for defendants (who include
herein petitioner) opposed the move for postponement and moved instead for the dismissal of the
case. The RTC noted that it was obvious that respondents had failed to prosecute the case for an
unreasonable length of time, in fact not having presented their evidence yet. On that ground, the
complaint was dismissed. At the same time, the RTC allowed defendants "to present their evidence
ex-parte."12
Respondents filed a Motion for Reconsideration13 of the order issued in open court on 27 July 2005,
opting however not to seek that their complaint be reinstated, but praying instead that the entire
action be dismissed and petitioner be disallowed from presenting evidence ex-parte. Respondents
claimed that the order of the RTC allowing petitioner to present evidence ex-parte was not in accord
with established jurisprudence. They cited cases, particularly City of Manila v.
Ruymann14 and Domingo v. Santos,15 which noted those instances in which a counterclaim could not
remain pending for independent adjudication.
On 9 August 2005, the RTC promulgated an order granting respondents Motion for
Reconsideration and dismissing the counterclaim, citing as the only ground therefor that "there is
no opposition to the Motion for Reconsideration of the [respondents]."16 Petitioner filed a Motion
for Reconsideration, but the same was denied by the RTC in an Order dated 10 October
2005.17 Notably, respondents filed an Opposition to Defendants Urgent Motion for Reconsideration,
wherein they argued that the prevailing jurisprudential rule18 is that "compulsory counterclaims
cannot be adjudicated independently of plaintiffs cause of action," and "a conversu, the dismissal of
the complaint carries with it the dismissal of the compulsory counterclaims."19

The matter was elevated to this Court directly by way of a Petition for Review under Rule 45 on a
pure question of law, the most relevant being whether the dismissal of the complaint necessarily
carries the dismissal of the compulsory counterclaim.
We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the dismissal of the
complaint due to the fault of plaintiff does not necessarily carry with it the dismissal of the
counterclaim, compulsory or otherwise. In fact, the dismissal of the complaint is without prejudice
to the right of defendants to prosecute the counterclaim.
On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly adopt respondents
argument that the dismissal of their complaint extended as well to the counterclaim. Instead, the
RTC justified the dismissal of the counterclaim on the ground that "there is no opposition to
[plaintiffs] Motion for Reconsideration [seeking the dismissal of the counterclaim]."20 This
explanation is hollow, considering that there is no mandatory rule requiring that an opposition be
filed to a motion for reconsideration without need for a court order to that effect; and, as posited by
petitioner, the "failure to file an opposition to the Plaintiffs Motion for Reconsideration is definitely
not one among the established grounds for dismissal [of the counterclaim]."21 Still, the dismissal of
the counterclaim by the RTC betrays at very least a tacit recognition of respondents argument that
the counterclaim did not survive the dismissal of the complaint. At most, the dismissal of the
counterclaim over the objection of the defendant (herein petitioner) on grounds other than the
merits of the counterclaim, despite the provisions under Rule 17 of the 1997 Rules of Civil
Procedure, constitutes a debatable question of law, presently meriting justiciability through the
instant action. Indeed, in reviewing the assailed orders of the RTC, it is inevitable that the Court
consider whether the dismissal of the complaint, upon motion of the defendant, on the ground of
the failure to prosecute on plaintiffs part precipitates or carries with it the dismissal of the pending
counterclaims.
Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil Procedure, which
states:
SEC. 3. Dismissal due to fault of plaintiff.If, for no justifiable cause, the plaintiff fails to appear on
the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of defendant or upon the court's own motion, without
prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate
action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court.
The express qualification in the provision that the dismissal of the complaint due to the plaintiffs
fault, as in the case for failure to prosecute, is without prejudice to the right of the defendant to
prosecute his counterclaim in the same or separate action. This stands in marked contrast to the
provisions under Rule 17 of the 1964 Rules of Court which were superseded by the 1997
amendments. In the 1964 Rules, dismissals due to failure to prosecute were governed by Section 3,
Rule 17, to wit:
SEC. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, or to prosecute his
action for an unreasonable length of time, or to comply with these rules or any order of the court,
the action may be dismissed upon motion of the defendant or upon the courts own motion. This

dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by
court.
Evidently, the old rule was silent on the effect of such dismissal due to failure to prosecute on the
pending counterclaims. As a result, there arose what one authority on remedial law characterized
as "the nagging question of whether or not the dismissal of the complaint carries with it the
dismissal of the counterclaim."22 Jurisprudence construing the previous Rules was hardly silent on
the matter.
In their arguments before the RTC on the dismissal of the counterclaim, respondents cited in
support City of Manila v.
Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25 and Froilan v. Pan Oriental Shipping
Co.,26 all of which were decided more than five decades ago. Notably though, none of the complaints
in these four cases were dismissed either due to the fault of the plaintiff or upon the instance of the
defendant.27
The distinction is relevant, for under the previous and current incarnations of the Rules of Civil
Procedure, it is Section 3, Rule 17 that governs the dismissals due to the failure of the plaintiff to
prosecute the complaint, as had happened in the case at bar. Otherwise, it is Section 2, Rule 17,
which then, and still is now, covered dismissals ordered by the trial court upon the instance of the
plaintiff.28 Yet, as will be seen in the foregoing discussion, a discussion of Section 2 cannot be
avoided as the postulate behind that provision was eventually extended as well in cases that should
have properly been governed by Section 3.
Even though the cases cited by respondents involved different factual antecedents, there exists
more appropriate precedents which they could have cited in support of their claim that the
counterclaim should have been dismissed even if the dismissal of the complaint was upon the
defendants motion and was predicated on the plaintiffs fault. BA Finance Corp. v. Co29 particularly
stands out in that regard, although that ruling is itself grounded on other precedents as well.
Elucidation of these cases is in order.
On the general effect of the dismissal of a complaint, regardless of cause, on the pending
counterclaims, previous jurisprudence laid emphasis on whether the counterclaim was compulsory
or permissive in character. The necessity of such distinction was provided in the 1964 Rules itself,
particularly Section 2, Rule 17, which stated that in instances wherein the plaintiff seeks the
dismissal of the complaint, "if a counterclaim has been pleaded by a defendant prior to the service
upon him of the plaintiffs motion to dismiss, the action shall not be dismissed against the
defendants objection unless the counterclaim can remain pending for independent adjudication by
the court."30 The
vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17, noted that "[t]here
are instances in which a counterclaim cannot remain pending for independent adjudication, as,
where it arises out of, or is necessarily connected with, the transaction or occurrence which is the
subject matter of the opposing partys claim."31
This view expressed in Morans Commentaries was adopted by the Court in cases where the
application of Section 2, Rule 17 of the 1964 Rules of Court was called for, such as in Lim Tanhu v.
Ramolete,32 and Dalman v. City Court of Dipolog City.33 The latter case warrants brief elaboration.

Therein, the plaintiff in a civil case for damages moved for the withdrawal of her own case on the
ground that the dispute had not been referred to the barangay council as required by law. Over the
objection of the defendant, who feared that her own counterclaim would be prejudiced by the
dismissal, plaintiffs motion was granted, the complaint and the counterclaim accordingly dismissed
by the trial court. The Court refused to reinstate the counterclaim, opining without elaboration, "[i]f
the civil case is dismissed, so also is the counterclaim filed therein."34 The broad nature of that
statement gave rise to the notion that the mandatory
dismissal of the counterclaim upon dismissal of the complaint applied regardless of the cause of the
complaints dismissal.35
Notably, the qualification concerning compulsory counterclaims was provided in Section 2, Rule 17
of the 1964 Rules, the provision governing dismissals by order of the court, and not Section 3, Rule
17. As stated earlier, Section 3, which covered dismissals for failure to prosecute upon motion of the
defendant or upon motu proprioaction of the trial court, was silent on the effect on the counterclaim
of dismissals of such nature.
Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in 1972, ostensibly supplied the gap on the
effect on the counterclaim of complaints dismissed under Section 3. The defendants therein
successfully moved before the trial court for the dismissal of the complaint without prejudice and
their declaration in default on the counterclaim after plaintiffs therein failed to attend the pre-trial.
After favorable judgment was rendered on the counterclaim, plaintiffs interposed an appeal, citing
among other grounds, that the counterclaim could no longer have been heard after the dismissal of
the complaint. While the Court noted that the adjudication of the counterclaim in question "does
not depend upon the adjudication of the claims made in the complaint since they were virtually
abandoned by the non-appearance of the plaintiffs themselves," it was also added that "[t]he
doctrine invoked is not available to plaintiffs like the petitioners, who prevent or delay the hearing
of their own claims and allegations."37 The Court, through Justice JBL Reyes, noted:
The doctrine that the complaint may not be dismissed if the counterclaim cannot be
independently adjudicated is not available to, and was not intended for the benefit of, a
plaintiff who prevents or delays the prosecution of his own complaint. Otherwise, the trial of
counterclaims would be made to depend upon the maneuvers of the plaintiff, and the rule would
offer a premium to vexing or delaying tactics to the prejudice of the counterclaimants. It is in the
same spirit that we have ruled that a complaint may not be withdrawn over the opposition of the
defendant where the counterclaim is one that arises from, or is necessarily connected with, the
plaintiffs action and cannot remain pending for independent adjudication.38
There is no doubt that under the 1964 Rules, the dismissal of a complaint due to the failure of the
plaintiff to appear during pre-trial, as what had happened in Sta. Maria, fell within the coverage of
Section 3, Rule 17. On the other hand, Section 2 was clearly limited in scope to those dismissals
sustained at the instance of the plaintiff.39Nonetheless, by the early 1990s, jurisprudence was
settling on a rule that compulsory counterclaims were necessarily terminated upon the dismissal of
the complaint not only if such dismissal was upon motion of the plaintiff, but at the instance of the
defendant as well. Two decisions from that period stand out in this regard,Metals Engineering
Resources Corp. v. Court of Appeals40 and International Container Terminal Services v. Court of
Appeals.41

In Metals, the complaint was expunged from the record after the defendant had filed a motion for
reconsideration of a trial court order allowing the filing of an amended complaint that corrected a
jurisdictional error in the original complaint pertaining to the specification of the amount of
damages sought. When the defendant was nonetheless allowed to present evidence on the
counterclaim, the plaintiff assailed such allowance on the ground that the counterclaim was
compulsory and could no longer remain pending for independent adjudication. The Court, in
finding for the plaintiff, noted that the counterclaim was indeed compulsory in nature, and as such,
was auxiliary to the proceeding in the original suit and derived its jurisdictional support
therefrom.42 It was further explained that the doctrine was in consonance with the primary
objective of a counterclaim, which was to avoid and prevent circuitry of action by allowing the
entire controversy between the parties to be litigated and finally determined in one action, and to
discourage multiplicity of suits.43 Also, the Court noted that since the complaint was dismissed for
lack of jurisdiction, it was as if no claim was filed against the defendant, and there was thus no more
leg for the complaint to stand on.44
In International Container, the defendant filed a motion to dismiss which was granted by the trial
court. The defendants counterclaim was dismissed as well. The Court summarized the key question
as "what is the effect of the dismissal of a complaint ordered at the instance of the defendant upon a
compulsory counterclaim duly raised in its answer."45 Then it ruled that the counterclaim did not
survive such dismissal. After classifying the counterclaim therein as compulsory, the Court noted
that "[i]t is obvious from the very nature of the counterclaim that it could not remain pending for
independent adjudication, that is, without adjudication by the court of the complaint itself on which
the counterclaim was based."46
Then in 1993, a divided Court ruled in BA Finance that the dismissal of the complaint for
nonappearance of plaintiff at the pre-trial, upon motion of the defendants, carried with it the
dismissal of their compulsory counterclaim.47 The Court reiterated the rule that "a compulsory
counterclaim cannot remain pending for independent adjudication by the court as it is auxiliary to
the proceeding in the original suit and merely derives its jurisdictional support
therefrom."48 Express reliance was made on Metals, International Container, and even Dalman in
support of the majoritys thesis. BA Finance likewise advised that the proper remedy for defendants
desirous that their counterclaims not be dismissed along with the main complaint was for them to
move to declare the plaintiffs to be "non-suited" on their complaint and "as in default" on their
compulsory counterclaim, instead of moving for the dismissal of the complaint.49
Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to the theory of the
majority. They agreed that the trial court could no longer hear the counterclaim, but only on the
ground that defendants motion to be allowed to present evidence on the counterclaim was filed
after the order dismissing the complaint had already become final. They disagreed however that the
compulsory counterclaim was necessarily dismissed along with the main complaint, pointing out
that a situation wherein the dismissal of the complaint was occasioned by plaintiffs failure to
appear during pre-trial was governed under Section 3, Rule 17, and not Section 2 of the same rule.
Justice Regalado, who ironically penned the decision in Metals cited by the majority, explained:
Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof envisage different
factual and adjective situations. The dismissal of the complaint under Section 2 is at the instance of
plaintiff, for whatever reason he is minded to move for such dismissal, and, as a matter of
procedure, is without prejudice unless otherwise stated in the order of the court or, for that matter,
in plaintiff's motion to dismiss his own complaint. By reason thereof, to curb any dubious or

frivolous strategy of plaintiff for his benefit or to obviate possible prejudice to defendant, the
former may not dismiss his complaint over the defendant's objection if the latter has a compulsory
counterclaim since said counterclaim would necessarily be divested of juridical basis and defendant
would be deprived of possible recovery thereon in that same judicial proceeding.
Section 3, on the other hand, contemplates a dismissal not procured by plaintiff, albeit justified by
causes imputable to him and which, in the present case, was petitioner's failure to appear at the
pre-trial. This situation is also covered by Section 3, as extended by judicial interpretation, and is
ordered upon motion of defendant or motu proprio by the court. Here, the issue of whether
defendant has a pending counterclaim, permissive or compulsory, is not of determinative
significance. The dismissal of plaintiff's complaint is evidently a confirmation of the failure of
evidence to prove his cause of action outlined therein, hence the dismissal is considered, as a
matter of evidence, an adjudication on the merits. This does not, however, mean that there is
likewise such absence of evidence to prove defendant's counterclaim although the same arises out
of the subject matter of the complaint which was merely terminated for lack of proof. To hold
otherwise would not only work injustice to defendant but would be reading a further provision into
Section 3 and wresting a meaning therefrom although neither exists even by mere implication. Thus
understood, the complaint can accordingly be dismissed, but relief can nevertheless be granted as a
matter of course to defendant on his counterclaim as alleged and proved, with or without any
reservation therefor on his part, unless from his conduct, express or implied, he has virtually
consented to the concomitant dismissal of his counterclaim.50
Justice Regalado also adverted to Sta. Maria and noted that the objections raised and rejected by the
Court therein were the same as those now relied upon by the plaintiff. He pointed out
that Dalman and International Container, both relied upon by the majority, involved the application
of Section 2, Rule 17 and not Section 3, which he insisted as the applicable provision in the case at
bar.51
The partial dissent of Justice Regalado in BA Finance proved opportune, as he happened then to be a
member of the Rules of Court Revision Committee tasked with the revision of the 1964 Rules of
Court. Just a few months after BA Finance was decided, Justice Regalado proposed before the
Committee an amendment to Section 3, Rule 17 that would explicitly provide that the dismissal of
the complaint due to the fault of the plaintiff shall be "without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate action." The amendment,
which was approved by the Committee, is reflected in the minutes of the meeting of the Committee
held on 12 October 1993:
[Justice Regalado] then proposed that after the words "upon the courts own motion" in the 6th line
of the draft in Sec. 3 of Rule 17, the following provision be inserted: "without prejudice to the
right of the defendant to prosecute his counterclaim in the same or in a separate action." The
Committee agreed with the proposed amendment of Justice Regalado.
Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the action that is dismissed but
the complaint. He asked whether there is any distinction between "complaint" and "action." Justice
Regalado opined that the action of the plaintiff is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to the complaint[.] Thus, in the 1st
line of Sec. 1, the words "An action" will be changed to "a complaint"; in the 2nd line of Sec. 2,
the words "an action" will be changed to "a complaint" and in Sec. 3, the word "action" on the

5th line of the draft will be changed to "complaint." The Committee agreed with Justice
Ferias suggested amendments.
CA Pao believed that there is a need to clarify the counterclaim that the defendant will
prosecute, whether it is permissive or compulsory or all kinds of counterclaims.
Justice Regalado opined that there is no need of making a clarification because it is already
understood that it covers both counterclaims.52
It is apparent from these minutes that the survival of the counterclaim despite the dismissal of the
complaint under Section 3 stood irrespective of whether the counterclaim was permissive or
compulsory. Moreover, when the Court itself approved the revisions now contained in the 1997
Rules of Civil Procedure, not only did Justice Regalados amendment to Section 3, Rule 17 remain
intact, but the final version likewise eliminated the qualification formerly offered under Section 2
on "counterclaims that can remain pending for independent adjudication by the court."53 At
present, even Section 2, concerning dismissals on motion of the plaintiff, now recognizes the right
of the defendant to prosecute the counterclaim either in the same or separate action
notwithstanding the dismissal of the complaint, and without regard as to the permissive or
compulsory nature of the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on the effects
of the amendments to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves for the dismissal of his complaint to
which a counterclaim has been interposed, the dismissal shall be limited to the complaint. Such
dismissal shall be without prejudice to the right of the defendant to either prosecute his
counterclaim in a separate action or to have the same resolved in the same action. Should he opt for
the first alternative, the court should render the corresponding order granting and reserving his
right to prosecute his claim in a separate complaint. Should he choose to have his counterclaim
disposed of in the same action wherein the complaint had been dismissed, he must manifest such
preference to the trial court within 15 days from notice to him of plaintiffs motion to
dismiss.These alternative remedies of the defendant are available to him regardless of
whether his counterclaim is compulsory or permissive. A similar alternative procedure, with
the same underlying reason therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein
the complaint is dismissed on the motion of thedefendant or, in the latter instance, also by the
court motu proprio.
xxxx
2. The second substantial amendment to [Section 3] is with respect to the disposition of the
defendants counterclaim in the event the plaintiffs complaint is dismissed. As already observed, he
is here granted the choice to prosecute that counterclaim in either the same or a separate action. x x
xx
3. With the aforestated amendments in Secs. 2 and 3 laying down specific rules on the
disposition of counterclaims involved in the dismissal actions, the controversial doctrine
in BA Finance Corporation vs. Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned,
together with the apparent confusion on the proper application of said Secs. 2 and 3. Said

sections were distinguished and discussed in the authors separate opinion in that case, even before
they were clarified by the present amendments x x x.54
Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to move for
the dismissal of the complaint and to prosecute his counterclaim, as stated in the separate opinion
[of Justice Regalado in BA Finance.]"55 Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that "nagging question" whether the dismissal of the
complaint carries with it the dismissal of the counterclaim, and opines that by reason of the
amendments, the rulings in Metals Engineering, International Container, and BA Finance "may be
deemed abandoned."56 On the effect of amendment to Section 3, Rule 17, the commentators are in
general agreement,57 although there is less unanimity of views insofar as Section 2, Rule 17 is
concerned.58
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the
amended Rule 17, those previous jural doctrines that were inconsistent with the new rules
incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents
arising after the effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the
doctrine that a counterclaim may be necessarily dismissed along with the complaint, clearly
conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as doctrine
extends as far back as 1997, when the Court adopted the new Rules of Civil Procedure. If, since then,
such abandonment has not been affirmed in jurisprudence, it is only because no proper case has
arisen that would warrant express confirmation of the new rule. That opportunity is here and now,
and we thus rule that the dismissal of a complaint due to fault of the plaintiff is without prejudice to
the right of the defendant to prosecute any pending counterclaims of whatever nature in the same
or separate action. We confirm that BA Finance and all previous rulings of the Court that are
inconsistent with this present holding are now abandoned.
Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since Section
3, Rule 17 mandates that the dismissal of the complaint is without prejudice to the right of the
defendant to prosecute the counterclaim in the same or separate action. If the RTC were to dismiss
the counterclaim, it should be on the merits of such counterclaim. Reversal of the RTC is in order,
and a remand is necessary for trial on the merits of the counterclaim.
It would be perfectly satisfactory for the Court to leave this matter at that. Still, an explanation of
the reason behind the new rule is called for, considering that the rationale behind the previous rule
was frequently elaborated upon.
Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901, it was recognized
in Section 127(1) that the plaintiff had the right to seek the dismissal of the complaint at any time
before trial, "provided a counterclaim has not been made, or affirmative relief sought by the crosscomplaint or answer of the defendant."59 Note that no qualification was made then as to the nature
of the counterclaim, whether it be compulsory or permissive. The protection of the defendants
right to prosecute the counterclaim was indeed unqualified. In City of Manila, decided in 1918, the
Court explained:
By paragraph 1 [of Section 127], it will be seen that, where the defendant has interposed a
counterclaim, or is seeking affirmative relief by a cross-complaint, that then, and in that case, the
plaintiff cannot dismiss the action so as to affect the right of the defendant in his counterclaim or
prayer for affirmative relief. The reason for that exception is clear. When the answer sets up an

independent action against the plaintiff, it then becomes an action by the defendant against
the plaintiff, and, of course, the plaintiff has no right to ask for a dismissal of
the defendants action.60
Nonetheless, a new rule was introduced when Act No. 190 was replaced by the 1940 Rules of Court.
Section 2, Rule 30 of the 1940 Rules specified that if a counterclaim is pleaded by a defendant prior
to the service of the plaintiffs motion to dismiss, the action shall not be dismissed against the
defendants objection unless the counterclaim can remain pending for independent adjudication by
the court. This qualification remained intact when the 1964 Rules of Court was introduced.61 The
rule referred only to compulsory counterclaims, or counterclaims which arise out of or are
necessarily connected with the transaction or occurrence that is the subject matter of the plaintiffs
claim, since the rights of the parties arising out of the same transaction should be settled at the
same time.62 As was evident in Metals, International Container and BA Finance, the rule was
eventually extended to instances wherein it was the defendant with the pending counterclaim, and
not the plaintiff, that moved for the dismissal of the complaint.
We should not ignore the theoretical bases of the rule distinguishing compulsory counterclaims
from permissive counterclaims insofar as the dismissal of the action is concerned. There is a
particular school of thought that informs the broad proposition in Dalman that "if the civil case is
dismissed, so also is the counterclaim filed therein,"63 or the more nuanced discussions offered
in Metals, International Container, and BA Finance. The most potent statement of the theory may be
found in Metals,64 which proceeds from the following fundamental premisesa compulsory
counterclaim must be set up in the same proceeding or would otherwise be abated or barred in a
separate or subsequent litigation on the ground of auter action pendant, litis pendentia or res
judicata; a compulsory counterclaim is auxiliary to the main suit and derives its jurisdictional
support therefrom as it arises out of or is necessarily connected with the transaction or occurrence
that is the subject matter of the complaint;65and that if the court dismisses the complaint on the
ground of lack of jurisdiction, the compulsory counterclaim must also be dismissed as it is merely
ancilliary to the main action and no jurisdiction remained for any grant of relief under the
counterclaim.
The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while the two latter
points are sourced from American jurisprudence. There is no disputing the theoretical viability of
these three points. In fact, the requirement that the compulsory counterclaim must be set up in the
same proceeding remains extant under the 1997 Rules of Civil Procedure.66 At the same time, other
considerations rooted in actual practice provide a counterbalance to the above-cited rationales.
Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint;
namely a cause (or causes) of action constituting an act or omission by which a party violates the
right of another. The main difference lies in that the cause of action in the counterclaim is
maintained by the defendant against the plaintiff, while the converse holds true with the complaint.
Yet, as with a complaint, a counterclaim without a cause of action cannot survive.
It would then seemingly follow that if the dismissal of the complaint somehow eliminates the
cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that hardly is the case,
especially as a general rule. More often than not, the allegations that form the counterclaim are
rooted in an act or omission of the plaintiff other than the plaintiffs very act of filing the
complaint. Moreover, such acts or omissions imputed to the plaintiff are often claimed to
have occurred prior to the filing of the complaint itself. The only apparent exception to this

circumstance is if it is alleged in the counterclaim that the very act of the plaintiff in filing the
complaint precisely causes the violation of the defendants rights. Yet even in such an
instance, it remains debatable whether the dismissal or withdrawal of the complaint is
sufficient to obviate the pending cause of action maintained by the defendant against the
plaintiff.67
These considerations persist whether the counterclaim in question is permissive or compulsory. A
compulsory counterclaim arises out of or is connected with the transaction or occurrence
constituting the subject matter of the opposing partys claim, does not require for its adjudication
the presence of third parties, and stands within the jurisdiction of the court both as to the amount
involved and the nature of the claim.68 The fact that the culpable acts on which the counterclaim is
based are founded within the same transaction or occurrence as the complaint, is insufficient
causation to negate the counterclaim together with the complaint. The dismissal or withdrawal of
the complaint does not traverse the boundaries of time to undo the act or omission of the plaintiff
against the defendant, or vice versa. While such dismissal or withdrawal precludes the pursuit of
litigation
by the plaintiff, either through his/her own initiative or fault, it would be iniquitous to similarly
encumber the defendant who maintained no such initiative or fault. If the defendant similarly
moves for the dismissal of the counterclaim or neglects to timely pursue such action, let the
dismissal of the counterclaim be premised on those grounds imputable to the defendant, and not on
the actuations of the plaintiff.
The other considerations supplied in Metals are anchored on the premise that the jurisdictional
foundation of the counterclaim is the complaint itself. The theory is correct, but there are other
facets to this subject that should be taken into account as well. On the established premise that a
counterclaim involves separate causes of action than the complaint even if derived from the same
transaction or series of transactions, the counterclaim could have very well been lodged as a
complaint had the defendant filed the action ahead of the complainant.69 The terms "ancillary" or
"auxiliary" may mislead in signifying that a complaint innately possesses more credence than a
counterclaim, yet there are many instances wherein the complaint is trivial but the counterclaim is
meritorious. In truth, the notion that a counterclaim is, or better still, appears to be merely
"ancillary" or "auxiliary" is chiefly the offshoot of an accident of chronology, more than anything
else.
The formalistic distinction between a complaint and a counterclaim does not detract from the fact
that both of them embody causes of action that have in their end the vindication of rights. While the
distinction is necessary as a means to facilitate order and clarity in the rules of procedure, it should
be remembered that the primordial purpose of procedural rules is to provide the means for the
vindication of rights. A party with a valid cause of action against another party cannot be denied the
right to relief simply because the opposing side had the good fortune of filing the case first. Yet this
in effect was what had happened under the previous procedural rule and correspondent doctrine,
which under their final permutation, prescribed the automatic dismissal of the compulsory
counterclaim upon the dismissal of the complaint, whether upon the initiative of the plaintiff or of
the defendant.
Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition
of the counterclaims by ensuring that any judgment thereon is based on the merit of the
counterclaim itself and not on the survival of the main complaint. Certainly, if the counterclaim is

palpably without merit or suffers jurisdictional flaws which stand independent of the complaint, the
trial court is not precluded from dismissing it under the amended rules, provided that the judgment
or order dismissing the counterclaim is premised on those defects. At the same time, if the
counterclaim is justified, the amended rules now unequivocally protect such counterclaim from
peremptory dismissal by reason of the dismissal of the complaint.
WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10 October 2005 of
Branch 29, Regional Trial Court of San Miguel, Zamboanga del Sur in Civil Case No. 98-012 are SET
ASIDE. Petitioners counterclaim as defendant in Civil Case. No. 98-012 is REINSTATED. The
Regional Trial Court is ORDERED to hear and decide the counterclaim with deliberate dispatch.
SO ORDERED.

G.R. No. 129718 August 17, 1998

SANTO TOMAS UNIVERSITY HOSPITAL, petitioner,
vs.
CESAR ANTONIO Y. SURLA and EVANGELINE SURLA, respondents.

VITUG, J.:
Can a compulsory counterclaim pleaded in an Answer be dismissed on the ground of a failure to
accompany it with a certificate of non-forum shopping? This question is the core issue presented
for resolution in the instant petition.
First, a factual background.
On 26 December 1995, respondent spouses filed a complaint for damages against petitioner Santo
Tomas University Hospital with the Regional Trial Court of Quezon City predicated on an allegation
by the spouses that their son, Emmanuel Cesar Surla, while confined at the said hospital for having
been born prematurely, had accidentally fallen from his incubator on 16 April 1995 possibly
causing serious harm on the child. The case was raffled and assigned to Branch 226 of the Regional
Trial Court of Quezon City, presided over by the Hon. Leah S. Domingo-Regala, and there docketed
Civil Case No. Q-95-25977.
On 28 February 1996, petitioner hospital filed its Answer with "Compulsory Counterclaim"
asserting that respondents still owed to it the amount of P82,632.10 representing hospital bills for
Emmanuel's confinement at the hospital and making a claim for moral and exemplary damages,
plus attorney's fees, by reason of the supposed unfounded and malicious suit filed against it.
On 21 March 1996, petitioner received a copy of respondents' Reply to Counterclaim, dated 12
March 1996, that sought, inter alia, the dismissal of petitioner's counterclaim for its noncompliance with Supreme Court Administrative Circular No. 04-94 requiring that a complaint and

other initiatory pleadings, such as a counterclaim, cross-claim, third (fourth, etc.) party complaint,
be accompanied with a certificate of non-forum shopping.
In its Rejoinder to respondents' Reply to Counterclaim, petitioner contended that the subject
circular should be held to refer only to a permissive counterclaim, an initiatory pleading not arising
out of, nor necessarily connected with, the subject matter of the plaintiffs claim but not to a
compulsory counterclaim spawned by the filing of a complaint and so intertwined therewith and
logically related thereto that it verily could not stand for independent adjudication. Petitioner
concluded that, since its counterclaim was compulsory in nature, the subject circular did not
perforce apply to it. 1
In its Order of 22 March 1996, the trial court dismissed petitioner's counterclaim; it held:
Administrative Circular No. 04-94 provides; among others:
The complaint and other initiatory pleadings referred to and subject
of this Circular are the original civil complaint, counterclaim,
crossclaim, third (fourth, etc.) party complaint, or complaint-inintervention, petition or application wherein a party asserts his
claim on (sic) relief.
It will be noted that the counterclaim does not distinguish whether the same should
be permissive or compulsory, hence this Court finds that the counterclaim referred
to in said Circular covers both kinds.
WHEREFORE, the counterclaim of defendant is hereby DISMISSED. Let the pre-trial
of this case be set on May 14, 1996 at 2:00 o'clock in the afternoon . . . . 2
On 16 April 1996, petitioner filed before the same court an Omnibus Motion seeking a clarification
of the court's Order of 14 March 1996 denying respondents' Reply to Counterclaim and a
reconsideration of the 22nd March 1996 Order dismissing the compulsory counterclaim. 3 On 22
April 1996, petitioner received a copy of the court's Order, dated 16 April 1996, which pertinently
read:
WHEREFORE, the Order dated March 14, 1996 is hereby clarified as follows:
xxx xxx xxx
The Reply to counterclaim filed by counsel for plaintiffs is hereby
NOTED.
SO ORDERED.
The Motion for Reconsideration of this Court's Order dated March 22, 1996 is
hereby DENIED. The pre-trial conference set on May 14, 1998 will go on as
scheduled. 4
Petitioner forthwith elevated the matter to the Court of Appeals by way of a special civil
action for certiorari under Rule 65, Revised Rules of Court, asseverating grave abuse of

discretion by public respondent in dismissing the compulsory counterclaim and in

espousing the view that Administrative Circular No. 04-94 should apply even to compulsory
counterclaims.
The Court of Appeals, in its Decision promulgated on 12 March 1997, dismissed the petition
for certiorari; it opined:
. . . the Supreme Court circular aforequoted requires without equivocation that to
the original civil complaint, counterclaim, crossclaim, third (fourth, etc.) party
complaint, or complaint-in-intervention, petition, or application wherein a party
asserts his claim for relief to be filed in all courts and agencies other than the
Supreme Court and the Court of Appeals must be annexed and simultaneously filed
therewith the required certification under oath to avoid forum shopping or multiple
filing of petitions and complaints. Non-compliance therewith is a cause for the
dismissal of the complaint, petition, application or other initiatory pleading.
Included in such initiatory pleading is the defendant's counterclaim, permissive or
compulsory.
A counterclaim partakes of the nature of a complaint and/or a cause of action
against the plaintiff in a case . . ., only this time it is the original defendant who
becomes the plaintiff. It stands on the same footing and is tested by the same rules
as if it were an independent action. 5
In its present recourse, petitioner contends that
The Court of Appeals (has) committed serious, evident and palpable error in ruling
that:
5.1 THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 OF THE REVISED
RULES OF COURT IS UNAVAILING. THE DISMISSAL OF THE COMPULSORY
COUNTERCLAIM BEING A FINAL ORDER, THE PETITIONER SHOULD HAVE TAKEN
AN APPEAL THEREFROM; AND
5.2 ADMINISTRATIVE CIRCULAR NO. 04-94 OF THIS HONORABLE COURT
LIKEWISE APPLIES TO BOTH KINDS OF COUNTERCLAIMS, PERMISSIVE AND
COMPULSORY. 6
The petition is partly meritorious.
The appellate court ruled that the dismissal of the counterclaim, being a final order, petitioner's
remedy was to appeal therefrom and, such appeal being then available, the special civil action
of certiorari had been improperly filed.
The concept of a final judgment or order, distinguished from an interlocutory issuance, is that the
former decisively puts to a close, or disposes of, a case or a disputed issue leaving nothing else to be
done by the court in respect thereto. Once that judgment or order is rendered, the adjudicative task
of the court is likewise ended on the particular matter involved. 7 An order is interlocutory, upon
the other hand, if its effects would only be provisional in character and would still leave substantial
proceedings to be further had by the issuing court in order to put the controversy to rest. 8

The order of the trial court dismissing petitioner's counterclaim was a final order since the
dismissal, although based on a technicality, would require nothing else to be done by the court with
respect to that specific subject except only to await the possible filing during the reglementary
period of a motion for reconsideration or the taking of an appeal therefrom.
As a rule, errors of judgment, as well as of procedure, neither relating to the jurisdiction of the court
nor involving grave abuse of discretion, are not reviewable by the extraordinary remedy
of certiorari. 9 As long as a court acts within its jurisdiction and does not gravely abuse its discretion
in the exercise thereof, any supposed error committed by it will amount to nothing more than an
error of judgment reviewable by a timely appeal and not assailable by a special civil action
of certiorari. 10 This rule, however, is not a rigid and inflexible technicality. This Court has not too
infrequently given due course to a petition for certiorari, even when the proper remedy would have
been an appeal, where valid and compelling considerations could warrant such a
recourse. 11 Certiorari has been deemed to be justified, for instance, in order to prevent irreparable
damage and injury to a party where the trial judge has capriciously and whimsically exercised his
judgment, or where there may be danger of clear failure of justice, or where an ordinary appeal
would simply be inadequate to relieve a party from the injurious effects of the judgment
complained of. 12
In the case at bar, an appeal from the dismissal of the counterclaim, although not totally
unavailable, could have well been ineffective, if not futile, as far as petitioner is concerned since no
single piece of evidence has yet been presented by it, that opportunity having been foreclosed by
the trial court, on the dismissed counterclaim which could form part of the records to be reviewed
by the appellate court. The object of procedural law is not to cause an undue protraction of the
litigation, but to facilitate the adjudication of conflicting claims and to serve, rather than to defeat,
the ends of justice. 13
The opinion of this Court on the next issue persuades it to accept, tested by the foregoing
disquisition, the instant petition for its consideration.
The pertinent provisions of Administrative Circular No. 04-94 provide:
1. The plaintiff, petitioner, applicant or principal party seeking relief in the
complaint, petition, application or other initiatory pleading shall certify under oath
in such original pleading, or in a sworn certification annexed thereto and
simultaneously filed therewith, to the truth of the following facts and undertakings:
(a) he has not theretofore commenced any other action or proceeding involving the
same issues in the Supreme Court, the Court of Appeals, or any other tribunal or
agency; (b) to the best of his knowledge, no such action or proceeding is pending in
the Supreme Court, the Court of Appeals, or any other tribunal or agency; (c) if there
is any such action or proceeding which is either pending or may have been
terminated, he must state the status thereof; and (d) if he should thereafter learn
that a similar action or proceeding has been filed or is pending before the Supreme
Court, the Court of Appeals or any other tribunal or agency, he undertakes to report
that fact within five (5) days therefrom to the court or agency wherein the original
pleading and sworn certification contemplated here have been filed.
The complaint and other initiatory pleadings referred to and subject of this Circular
are the original civil complaint, counterclaim, cross-claim third (fourth, etc.)

party complaint or complaint-in-intervention, petition, or application wherein a

party asserts his claim for relief. (Emphasis supplied)
It bears stressing, once again, that the real office of Administrative Circular No. 04-94, made
effective on 01 April 1994, is to curb the malpractice commonly referred to also as forum-shopping.
It is an act of a party against whom an adverse judgment has been rendered in one forum of seeking
and possibly getting a favorable opinion in another forum, other than by appeal or the special civil
action of certiorari, or the institution of two or more actions or proceedings grounded on the same
cause on the supposition that one or the other court would make a favorable disposition. 14 The
language of the circular distinctly suggests that it is primarily intended to cover an initiatory
pleading or an incipient application of a party asserting a claim for relief. 15
It should not be too difficult, the foregoing rationale of the circular aptly taken, to sustain the view
that the circular in question has not, in fact, been contemplated to include a kind of claim which, by
its very nature as being auxiliary to the proceedings in the suit and as deriving its substantive and
jurisdictional support therefrom, can only be appropriately pleaded in the answer and not remain
outstanding for independent resolution except by the court where the main case pends. Prescinding
from the foregoing, the proviso in the second paragraph of Section 5, Rule 8, of the 1997 Rules of
Civil Procedure, i.e., that the violation of the anti-forum shopping rule "shall not be curable by mere
amendment . . . but shall be cause for the dismissal of the case without prejudice," being predicated
on the applicability of the need for a certification against forum shopping, obviously does not
include a claim which cannot be independently set up.
Petitioner, nevertheless, is entitled to a mere partial relief. The so-called "counterclaim" of
petitioner really consists of two segregative parts: (1) for unpaid hospital bills of respondents' son,
Emmanuel Surla, in the total amount of P82,032.10; and (2) for damages, moral and exemplary,
plus attorney's fees by reason of the alleged malicious and unfounded suit filed against it. 16 It is the
second, not the first, claim that the Court here refers to as not being initiatory in character and
thereby not covered by the provisions of Administrative Circular No. 04-94.
WHEREFORE, the appealed decision is hereby modified in that the claim for moral, exemplary
damages and attorney's fees in Civil Case No. Q-95-25977 of petitioner is ordered reinstated. The
temporary restraining order priorly issued by this Court is lifted. No costs.
SO ORDERED.

G.R. No. L-25889 January 17, 1973

HON. GUILLERMO E. TORRES, as Presiding Judge of the Court of First Instance of
Rizal, Branch VIII, THE PROVINCIAL SHERIFF OF THE PROVINCE OF RIZAL, JAIME E.
LAICO and LUZ LOS BANOS-LAICO,petitioners-appellants,
vs.
HON. COURT OF APPEALS, JOSE CHIVI and ANGELINA CHIVI as representative of the
deceased MARTA B. CHIVI, respondents-appellees. Ernesto J. Seva for petitionersappellants.
Ordonez, Cervo and Sanchez for respondents-appellees.

MAKALINTAL, J.:
Appeal by certiorari to review the decision of the Court of Appeals in CA-G.R. No.
35677-R, dated 31 August 1965.
The facts as found, by the Court of Appeals are as follows:
On 1 January 1955 the spouses Isidro Sierra and Antonia Magtaas sold a parcel of
land to Marta B. Chivi, representing to her that the land was not registered either
under the Land Registration Act or under the Spanish Mortgage Law and assuring
her that although the land was covered by a pre-war free patent application, the
application had not been approved and no patent had been issued. The Sierras made
that assurance because Chivi was not willing to buy the land if it was covered by a
patent, since it would then be subject to repurchase. They agreed that the purchase
price of P10,800.00 was not to be fully paid until the vendors could have the land
registered under Act 496.
At the instance of the Sierras, Chivi filed an application for registration of the land in
the Court of First Instance of Rizal. While the application was pending Chivi, on 24
May 1958, sold her rights and interests in the land to the herein petitioners-spouses
Jaime Laico and Luz Los Banos for P25,647.00, with the stipulation that should Chivi
fail to secure and transfer title to the Laicos she would return to them twice the
amount of the aforesaid purchase price. To induce the Laicos to buy Chivis rights and
interests, the Sierras showed them a petition withdrawing their free patent
application. The Laicos thereupon continued with the registration proceeding in
substitution of Chivi, who signed a deed of transfer of her rights.
In December, 1959 the Laicos discovered, and in January, 1960 Chivi learned, that a
free patent title had been previously issued to Isidro Sierra as early as 26 February
1932. The Laicos went to see the Sierras, who agree to execute, as they did execute
on January 17, 1960, another deed of sale in favor of the Laicos. The Laicos then
withdrew their application for registration and filed instead a petition for the
reconstitution of the title issued to Isidro Sierra.
On 14 June 1960, however, the Sierras filed a complaint against Marta B. Chivi,
assisted by her husband, and the Laicos in the Court of First Instance of Rizal,
docketed as Civil Case No. 6184, praying that they (plaintiffs) be allowed to
repurchase the land under the provisions of the Public Land Act. The Chivis and the
Laicos filed their answers to the complaint and counter-claimed for damages by
reason of the alleged bad faith, misrepresentation and fraudulent acts of the Sierras,
as herein before recounted. The Laicos filed a cross-claim against the Chivis for
collection of twice the amount of the price paid under their sales contract for the
latter's failure to deliver title to the Laicos, alleging that "the defendants Chivi are/or

will be liable on these warranties and condition should the plaintiffs finally obtain
favorable judgment in their favor" (sic).
On 12 March 1964 the Sierras and the Laicos entered into a compromise to amicably
settle Civil Case No. 6184 as between themselves, stipulating therein, among other
things, that the Laicos were now the absolute owners of the land and that the Sierras
would withdraw their objection to the reconstitution of the patent title and that said
title would be transferred in the name of the Laicos, who would pay P10,000.00 to
the Sierras; that the Sierras would ask for the dismissal of Civil Case No. 6184 insofar
as the Laicos were concerned and would convert their action in the case from one for
repurchase to one for collection of the balance of the sales price and of damages
against the Chivis; that the Laicos would pursue their cross-claim against the Chivis
and in the event they obtained a favorable judgment thereon they would pay to the
Sierras one-half (1/2) of any amount awarded to them in excess of the purchase
price of P25,647.00.
The compromise, which was executed without the knowledge of or notice to the
Chivis, was approved by the trial court on 12 March 1964. On the same date the
court, joint motion of the Sierras and the Laicos, dismissed witness prejudice the
complaint in Civil Case No. 6184 insofar as the Laicos were concerned as well as the
counter-claim of the Laicos against the Sierras. Chivi was not notified of the
dismissal.
The court set the case for pre-trial on 14 July 1964. Despite notice to the Sierras and
the Chivis, only cross-claimant Jaime Laico and his counsel appeared, whereupon the
court declared the Chivis in default and allowed Laico to present evidence on the
cross-claim before the deputy clerk of court. Counsel for the Chivis filed an urgent
motion for reconsideration, explaining why he failed to appear at the pre-trial, but
the motion was denied. On 5 February 1965 the court rendered judgment for the
Laicos, sentencing the cross-defendants to pay them a total amount of P15,000.00,
plus costs, and on 1 April 1965 issued a writ of execution. Pursuant to the writ the
sheriff levied upon the properties of the Chivis and issued a notice that the
properties would be sold at public auction on 14 April 1965.
In due time the Chivis filed with the Court of Appeal a petition for certiorari and
prohibition with preliminary injunction to annul: (1) the order of the trial court
authorizing the Laicos to adduce evidence ex parte on their cross-claim against
Marta B. Chivi; (2) the decision rendered on said cross-claim; and (3) the order
directing the issuance of a writ of execution, the levy on execution and the notice of
execution sale of the properties of Chivi prayed further that the therein respondents
be prohibited from conducting any further proceedings in said Civil Case No. 6184 on
the ground that the trial court was without jurisdiction in the premises.
Upon giving due course to the petition the Court of Appeals issued a writ of
preliminary injunction, restraining the therein respondents from proceedings with

the execution and with the sale at public auction set for 14 April 1965, until further
order.
On 31 August 1965 the Court of Appeals rendered decision declaring null and void all
the proceedings on the cross-claim of the spouses Laico against Chivi, as well as the
orders, decisions, writs and processes issued in connection therewith, and
restraining the therein respondent Judge and sheriff of the Court of First Instance of
Rizal from further proceeding in Civil Case No. 6184. The Laicos moved for
reconsideration. Pending resolution of the motion for reconsideration, Marta B.
Chivi died was substituted by Angelina Chivi. In an order dated 16 March 1966, the
motion for reconsideration was denied. Hence, the instant appeal
by certiorari brought by the Laicos.
The principal issue in this case is: Could the cross-claim in this particular action
stand after the complaint in the same action was dismissed with prejudice?
In the resolution of this issue the following considerations are pertinent:
(1) A cross-claim, as defined in Section 7 of Rule 6 is "any claim by one party against
a co-party arising out of the transaction or occurrence that is the subject matter
either of the original action or of a counterclaim therein."
(2) The cross-claim of the Laicos against the Chivis was for the recovery of the sum of
P51,294.00, upon the allegations that according to the contract of sale between them,
"should the defendants Chivi fail to transfer the title to the land in question to the
VENDEE (defendant Laico) then the former shall return to the latter (the aforesaid
sum) which is double the amount of the purchase price received by the defendants
Chivi;" and that "the defendants Chivi are/or will be liable on these warranties and
conditions should the plaintiffs (Sierras) finally obtain favorable judgment in their
favor" (sic).
(3) When Marta B. Chivi sold her "rights and interests" to the land in question to the
Laicos on 24 May 1958 the latter knew that Chivi had yet no registered title, and in
fact substituted her in the registration proceeding which she had initiated.
(4) In their counterclaim for damages against the Sierras in Civil Case No. 6184, the
Laicos alleged that the "plaintiffs, in fraudulently misrepresenting to the defendants
Chivi, as well as to the defendants Laico, that the land in question is unregistered and
is not covered by a patent, thereby inducing the latter to purchase the land in
question, which they would not have done had they known that the land is covered
by a patent, should be adjudged to pay ..."
(5) The warranty undertaken by Marta B. Chivi, judging by its terms and by the
surrounding circumstances was in respect of the transfer of ownership not of the
registered title to the Laicos. The action filed by the Sierras was not for recovery of
such ownership but for the exercise of their alleged right of repurchase under the

Public Land Act on the ground that the land they had sold was covered by a patent
title. In other words, the filing of the action did not militate against the warranty to
transfer title, for the very fact that the plaintiffs wished to enforce their alleged right
of repurchase was predicated on the assumption that the title, that is, ownership,
had been effectively transferred first to Chivi an subsequently by the latter to the
Laicos.
(6) In any event, even viewing the situation in the light most favorable to the Laicos,
their cross-claim on Chivi's warranty to deliver title to them was so inextricably
linked with and so utterly dependent upon the success of the complaint of the Sierras
for the repurchase of the land that when the complaint was dismissed the crossclaim could not possibly survive. For as the cross-claimants themselves alleged, the
cross-defendants would be liable on the warranty "should the plaintiffs finally obtain
favorable judgment in their favor" (sic). The warranty became functus oficio after
the Sierras, who turned out after all to have a free patent title to the land issued way
back in 1932, agreed to transfer and did transfer said title to the Laicos first by the
deed of sale executed directly in their favor by the Sierras on January 17, 1960, and
again in the amicable settlement of the case between them. The fact that the Laicos
paid P10,000.00 to the Sierras in that amicable settlement created no liability on the
part of the Chivis: first, because the latter neither knew nor consented to such
settlement; second, because the Laicos had already acquired the land directly, from
the Sierras by virtue of the aforesaid sale of January 17, 1960; and third because the
said sum of P10,000.00 was not the subject of the cross-claim against them.
Apropos is the following statement of the legal principle:
A cross-bill strictly speaking is one brought by a defendant in an equity suit against ...
other defendants in the same suit, touching the matters in question in the original
bill. It is considered as an auxiliary suit dependent upon the original bill, and can be
sustained only on matters growing out of the original bill. There is a well-defined
distinction between a cross-bill merely defensive in character, and one seeking
affirmative relief. The dismissal of the original bill carries with it a purely defensive
cross-bill but not one seeking affirmative relief. 1
The cross-claim in this case was purely defensive in nature. It arose entirely out of
the complaint and could prosper only if the plaintiffs succeeded. Hence, under the
principle above enunciated, it could not be the subject of independent adjudication
once it lost the nexus upon which its life depended.
Under the circumstances above set forth the dismissal of the cross-claim should have
followed the dismissal of the complaint as a matter of course, without further
proceeding; and in setting the said cross-claim for pre-trial and receiving evidence
thereon and then rendering judgment against the cross-defendants the court
committed such a grave abuse of discretion amounting to lack of jurisdiction
correctible by certiorari.

Concerning the argument that the respondents here were guilty of laches because
they filed their petition forcertiorari after the lapse of over 9 months from the time
judgment of the Court of First Instance was rendered, respondent Court of Appeals
ruled in our opinion correctly as follows:
xxx xxx xxx
To the contention that the petitioners' action is barred laches, we are bound to
disagree. The judgment by default was rendered on February 5, 1965. It is not known
when the petitioners received copy of this judgment, but the fact is that on April 13,
or after the lapse of only 2 months and 7 days from rendition of the judgment, the
petition for certiorari was filed with this Court. Principally, the petition assails the
decision and the writ of execution thereof which was issued on April 1. Assuming
that the decision complained of was actually received by the petitioners on the date
it was rendered, the intervening period to the filing of the petition is only 2 months
and 7 days, which is shorter than the shortest period of 2 months and 26 days cited
in the respondents' ex-parte motion for reconsideration in support of their theory of
laches. And a mere 12 days intervened between the issuance of the writ of execution
and the filing of the petition for certiorari.
xxx xxx xxx
Parenthetically, this Court would like to state that Judge Guillermo Torres should not
have been made to appear as active party-petitioner in this case, his participation
having become functus oficio after the rendered judgment, and therefore his role
being purely nominal in this petition.
In view of the foregoing considerations, the judgment of the Court of Appeals is
affirmed, without pronouncement as to costs.
Concepcion, C.J., Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio
and Esguerra, JJ., concur.

G.R. No. L-27930 November 26, 1970

AURORA A. ANAYA, plaintiff-appellant,
vs.
FERNANDO O. PALAROAN, defendant-appellee.
Isabelo V. Castro for plaintiff-appellant.
Arturo A. Romero for defendant-appellee.

REYES, J.B.L., J.:

Appeal from an order of dismissal, issued motu proprio by the Juvenile & Domestic
Relations Court, Manila, of a complaint for annulment of marriage, docketed therein as Civil
Case No. E-00431, entitled "Aurora A. Anaya, plaintiff vs. Fernando O. Palaroan, defendant."
The complaint in said Civil Case No. E-00431 alleged, inter alia, that plaintiff Aurora and
defendant Fernando were married on 4 December 1953; that defendant Fernando filed an
action for annulment of the marriage on 7 January 1954 on the ground that his consent was
obtained through force and intimidation, which action was docketed in the Court of First
Instance of Manila as Civil Case No. 21589; that judgment was rendered therein on 23
September 1959 dismissing the complaint of Fernando, upholding the validity of the
marriage and granting Aurora's counterclaim; that (per paragraph IV) while the amount of
the counterclaim was being negotiated "to settle the judgment," Fernando had divulged to
Aurora that several months prior to their marriage he had pre-marital relationship with a
close relative of his; and that "the non-divulgement to her of the aforementioned premarital secret on the part of defendant that definitely wrecked their marriage, which
apparently doomed to fail even before it had hardly commenced ... frank disclosure of
which, certitude precisely precluded her, the Plaintiff herein from going thru the marriage
that was solemnized between them constituted 'FRAUD', in obtaining her consent, within
the contemplation of No. 4 of Article 85 of the Civil Code" (sic) (Record on Appeal, page 3).
She prayed for the annulment of the marriage and for moral damages.
Defendant Fernando, in his answer, denied the allegation in paragraph IV of the complaint
and denied having had pre-marital relationship with a close relative; he averred that under
no circumstance would he live with Aurora, as he had escaped from her and from her
relatives the day following their marriage on 4 December 1953; that he denied having
committed any fraud against her. He set up the defenses of lack of cause of action and
estoppel, for her having prayed in Civil Case No. 21589 for the validity of the marriage and
her having enjoyed the support that had been granted her. He counterclaimed for damages
for the malicious filing of the suit. Defendant Fernando did not pray for the dismissal of the
complaint but for its dismissal "with respect to the alleged moral damages."
Plaintiff Aurora filed a reply with answer to the counterclaim, wherein she alleged:
(1) that prior to their marriage on 4 December 1953, he paid court to her, and pretended to
shower her with love and affection not because he really felt so but because she merely
happened to be the first girl available to marry so he could evade marrying the close
relative of his whose immediate members of her family were threatening him to force him
to marry her (the close relative);
(2) that since he contracted the marriage for the reason intimated by him, and not because
he loved her, he secretly intended from the very beginning not to perform the marital

duties and obligations appurtenant thereto, and furthermore, he covertly made up his mind
not to live with her;
(3) that the foregoing clandestine intentions intimated by him were prematurely
concretized for him, when in order to placate and appease the immediate members of the
family of the first girl (referent being the close relative) and to convince them of his
intention not to live with plaintiff, carried on a courtship with a third girl with whom, after
gaining the latter's love cohabited and had several children during the whole range of nine
years that Civil Case No. 21589, had been litigated between them (parties); (Record on
Appeal, pages 10-11)
Failing in its attempt to have the parties reconciled, the court set the case for trial on 26
August 1966 but it was postponed. Thereafter, while reviewing the expendiente, the court
realized that Aurora's allegation of the fraud was legally insufficient to invalidate her
marriage, and, on the authority of Brown vs. Yambao, 102 Phil. 168, holding:
It is true that the wife has not interposed prescription as a defense. Nevertheless, the courts
can take cognizance thereof, because actions seeking a decree of legal separation, or
annulment of marriage, involve public interest, and it is the policy of our law that no such
decree be issued if any legal obstacles thereto appear upon the record.
the court a quo required plaintiff to show cause why her complaint should not be
dismissed. Plaintiff Aurora submitted a memorandum in compliance therewith, but the
court found it inadequate and thereby issued an order, dated 7 October 1966, for the
dismissal of the complaint; it also denied reconsideration.
The main issue is whether or not the non-disclosure to a wife by her husband of his premarital relationship with another woman is a ground for annulment of marriage.
We must agree with the lower court that it is not. For fraud as a vice of consent in marriage,
which may be a cause for its annulment, comes under Article 85, No. 4, of the Civil Code,
which provides:
ART. 85. A marriage may be annulled for any of the following causes, existing at the time of
the marriage:
xxx xxx xxx
(4) That the consent of either party was obtained by fraud, unless such party afterwards,
with full knowledge of the facts constituting the fraud, freely cohabited with the other as
her husband or his wife, as the case may be;
This fraud, as vice of consent, is limited exclusively by law to those kinds or species of fraud
enumerated in Article 86, as follows:

ART. 86. Any of the following circumstances shall constitute fraud referred to in number 4
of the preceding article:
(1) Misrepresentation as to the identity of one of the contracting parties;
(2) Non-disclosure of the previous conviction of the other party of a crime involving moral
turpitude, and the penalty imposed was imprisonment for two years or more;
(3) Concealment by the wife of the fact that at the time of the marriage, she was pregnant
by a man other than her husband.
No other misrepresentation or deceit as to character, rank, fortune or chastity shall
constitute such fraud as will give grounds for action for the annulment of marriage.
The intention of Congress to confine the circumstances that can constitute fraud as ground
for annulment of marriage to the foregoing three cases may be deduced from the fact that,
of all the causes of nullity enumerated in Article 85, fraud is the only one given special
treatment in a subsequent article within the chapter on void and voidable marriages. If its
intention were otherwise, Congress would have stopped at Article 85, for, anyway, fraud in
general is already mentioned therein as a cause for annulment. But Article 86 was also
enacted, expressly and specifically dealing with "fraud referred to in number 4 of the
preceding article," and proceeds by enumerating the specific frauds (misrepresentation as
to identity, non-disclosure of a previous conviction, and concealment of pregnancy),
making it clear that Congress intended to exclude all other frauds or deceits. To stress
further such intention, the enumeration of the specific frauds was followed by the
interdiction: "No other misrepresentation or deceit as to character, rank, fortune or chastity
shall constitute such fraud as will give grounds for action for the annulment of marriage."
Non-disclosure of a husband's pre-marital relationship with another woman is not one of
the enumerated circumstances that would constitute a ground for annulment; and it is
further excluded by the last paragraph of the article, providing that "no other
misrepresentation or deceit as to ... chastity" shall give ground for an action to annul a
marriage. While a woman may detest such non-disclosure of premarital lewdness or feel
having been thereby cheated into giving her consent to the marriage, nevertheless the law
does not assuage her grief after her consent was solemnly given, for upon marriage she
entered into an institution in which society, and not herself alone, is interested. The
lawmaker's intent being plain, the Court's duty is to give effect to the same, whether it
agrees with the rule or not.
But plaintiff-appellant Anaya emphasizes that not only has she alleged "non-divulgement"
(the word chosen by her) of the pre-marital relationship of her husband with another
woman as her cause of action, but that she has, likewise, alleged in her reply that defendant
Fernando paid court to her without any intention of complying with his marital duties and
obligations and covertly made up his mind not to live with her. Plaintiff-appellant contends
that the lower court erred in ignoring these allegations in her reply.

This second set of averments which were made in the reply (pretended love and absence of
intention to perform duties of consortium) is an entirely new and additional "cause of
action." According to the plaintiff herself, the second set of allegations is "apart, distinct and
separate from that earlier averred in the Complaint ..." (Record on Appeal, page 76). Said
allegations were, therefore, improperly alleged in the reply, because if in a reply a partyplaintiff is not permitted to amend or change the cause of action as set forth in his
complaint (Calo vs. Roldan, 76 Phil. 445), there is more reason not to allow such party to
allege a new and additional cause of action in the reply. Otherwise, the series of pleadings
of the parties could become interminable.
On the merits of this second fraud charge, it is enough to point out that any secret intention
on the husband's part not to perform his marital duties must have been discovered by the
wife soon after the marriage: hence her action for annulment based on that fraud should
have been brought within four years after the marriage. Since appellant's wedding was
celebrated in December of 1953, and this ground was only pleaded in 1966, it must be
declared already barred.
FOR THE FOREGOING REASONS, the appealed order is hereby affirmed. No costs.

G.R. No. L-33255 November 29, 1972

ARTURO BALBASTRO, JOSE PEREZ, EDGARDO DE LA CRUZ, LEONARDO VILLANUEVA
and CONSORCIA HALILI, petitioners,
vs.
COURT OF APPEALS, HON. WALFRIDO DE LOS ANGELES, in his capacity as Judge of the
Court of First Instance of Rizal, Quezon City, Branch IV, and FRANCISCO E.
FERNANDEZ, respondents.
Flores, Macapagal, Ocampo and Balbastro for petitioners.
T.J. Sumawang and Associates for respondent Francisco E. Fernandez.

ANTONIO, J.:p
Appeal by Certiorari from the decision dated January 20, 1971, of the Court of Appeals,
sustaining the orders of November 17, 1969 and May 18, 1970 of the Court of First Instance

of Rizal, Quezon City Branch IV, in Civil Case No. Q-13297, an action for interpleader against
Francisco E. Fernandez and Angela M. Butte, and also from the resolution dated February
16, 1971 of the Special Division of the Court of Appeals denying petitioners' motion for
reconsideration.
The only issue raised in this Petition is whether or not the respondent Judge has committed
a grave abuse of discretion in allowing the inclusion of petitioners as parties in the
aforecited interpleader case on the basis of a pleading designated as "third-party
complaint" of respondent Francisco E. Fernandez.
The facts are undisputed. As correctly found by the Court of Appeals, on July 17, 1969, Chiu
Keng Iong, Lim Bun Kong and Rajindar Singh, lessees of three doors of a
10-door apartment situated at E. Rodriguez St., Quezon City, filed a complaint for
interpleader and consignation with the respondent Court of First Instance of Rizal, Quezon
City, Branch IV, which was docketed as Civil Case No. Q-13297 against private respondent
Francisco E. Fernandez and Angela M. Butte, each of whom was claiming ownership over
the aforementioned 10-door apartment and of the right to collect the rents therefrom. In
their complaint, plaintiffs alleged that they have no means of knowing definitely to whom
they should pay rentals whether to defendant Angela M. Butte or defendant Francisco E.
Fernandez.
In answer to plaintiffs' complaint defendant Francisco E. Fernandez alleged among others
that pending determination of the conflicting claims involved in the case he was granted
an ad interim authority to collect and deposit with the court the rentals due on the subject
property which authority was allegedly upheld by the Court of Appeals in its decision of
July 17, 1970 in CA-G.R. No. 44341-R entitled Angela M. Butte vs. Francisco E. Fernandez.
On the other hand, defendant Angela M. Butte claims that being the owner of the 10-door
apartment in question, she has every right to collect the rents of the property.
On October 29, 1969, private respondent Francisco E. Fernandez filed a Third-Party
Complaint against the third-party defendants (petitioners herein) who are the lessees of
the remaining doors of the 10-door apartment because of their refusal to recognize the
authority of private respondent Francisco E. Fernandez to collect the rents on the doors
leased by them. The third-party defendants who are now the petitioners herein filed with
the respondent court a "Motion To Strike Out And/Or To Dismiss The Third-Party
Complaint" filed by Francisco E. Fernandez on the ground that the filing of said
Third-Party Complaint against them is in violation of the express provisions of Section 12,
Rule 6 of the Revised Rules of Court and not in accord with established jurisprudence on
the matter and on the further ground that said Third-Party Complaint does not state any
cause of action.
On November 14, 1969 private respondent Francisco E. Fernandez filed his opposition to
petitioners' Motion To Strike And/Or To Dismiss The Third-Party Complaint. The motion of
petitioners To Strike Out And/Or To Dismiss the third-party complaint, was denied by the
Court a quo on November 17, 1969, and upon receipt of the order of denial petitioners filed

a Motion for Reconsideration of the same. This motion for reconsideration was likewise
denied on May 18, 1970.
In due time petitioners appealed to the Court of Appeals and sought (1) to annul and set
aside the Order of the respondent Judge dated November 17, 1969, denying their Motion to
Strike Out and/or Dismiss the Third-Party Complaint and its Order of May 18, 1970
denying their motion for reconsideration; (2) the dismissal of the Third-Party Complaint of
October 28, 1969; and (3) to prohibit and restrain the respondent Judge from proceeding
with the hearing of the said Third-Party Complaint and/or said Civil Case No. Q-13297.
On January 20, 1971, the respondent Court of Appeals rendered its decision dismissing the
petition and dissolved the writ of preliminary injunction previously issued. A motion for
reconsideration filed by petitioners was denied on February 16, 1971 by respondent
Appellate Court. Hence this petition for certiorari.
In ruling for the private respondents, the Court of Appeals stated:
The focal issue in this petition is whether or not the respondent Judge has committed a
grave abuse of discretion in allowing the defendant Francisco E. Fernandez in Civil Case No.
Q-13297 (now respondent herein) to file a third-party complaint against the third-party
defendants. It is well-settled in our jurisdiction that the admission of third-party complaint
is discretionary with the court. The exercise of this discretion should of course be guided by
well-established doctrines promulgated by our courts. In the same case cited by the
petitioners this Court held that:
Leave to bring in a third-party should be granted only if it will result in simplifying
procedure, expediting the litigation and reducing expenses. (J.M. Tuason & Co., Inc. vs.
Puno, CA-G.R. No. 25474-R, May 31, 1966).
Also in another case we held that:
Rule 6, Sec. 12, allows third-party complaint in order to minimize the number of lawsuits
and avoid the necessity of bringing two or more actions involving the same subject matter.
(Republic of the Philippines vs. Cleofe Ramos, et al., CA-G.R. No. L-18911, April 27, 1967).
Will the filing of the third-party complaint against the third-party defendant results in
simplifying procedure, expediting the litigation, and reducing expenses of the parties in the
present controversy? If it will, then definitely the respondent court has not abused its
discretion in denying the motion of petitioners to strike out and or dismiss the third-party
complaint filed against them. It is admitted that both the plaintiffs and the third-party
defendants (who are petitioners herein) are the common lessees of the 10-door apartment
the ownership of which is being litigated between defendant Angela M. Butte and thirdparty plaintiff Francisco E. Fernandez. As such lessees they have the same problem of
determining the right person to whom they should pay the corresponding rents of the
particular doors they are occupying. Because of the raging conflict between the defendant
Angela M. Butte and third-party plaintiff ultimately they would resort to an action for

interpleader against the conflicting claimant's of the subject property. To require each of
the petitioners to file an action for interpleader against the conflicting claimants of the
subject property will undoubtedly go against the rule on multiplicity of suits. On the other
hand by allowing the filing of the third-party complaint against the petitioners, the latter
will not only be spared of the trouble of filing an action for interpleader. It will likewise
save the third-party plaintiff from filing the necessary action for the collection of rents in
case the respondent court finally decides that said party-plaintiff is the one entitled to
collect the rents on the subject property. In our assessment of the facts and circumstances,
we are convinced that the respondent court did what it considered was necessary to
shorten the litigation between the parties by allowing the settlement of related or similar
problems confronting them in one single proceeding and avoiding multiplicity of actions.
Certainly, this actuation cannot be challenged as an abuse of discretion, much less a grave
one.
Petitioners contending that the Appellate Court misapplied the applicable rule, and
insisting that the "Third-Party Complaint" in Civil Case No. Q-13297, does not fall within
the context of Section 12 of Rule of the Revised Rules of Court and that the court a quo in
admitting the aforesaid "third-party complaint" gravely abused its discretion, now raises
those questions to Us for review.
I
Section 12 of Rule 6 of the Revised Rules of Court 1 authorizes a defendant to bring into a
lawsuit any person "not a party to the action ... for contribution, indemnity, subrogation or
any other relief in respect of his opponent's claim." From its explicit language it does not
compel the defendant to bring the third-parties into the litigation, rather it simply permits
the inclusion of anyone who meets the standard set forth in the rule. The secondary or
derivative liability of the third-party is central whether the basis is indemnity, subrogation,
contribution, express or implied warranty or some other theory. The impleader of new
parties under this rule is proper only when a right to relief exists under the applicable
substantive law. 2This rule is merely a procedural mechanism, and cannot be utilized unless
there is some substantive basis under applicable law.
Apart from the requirement that the third-party complainant should assert a derivative or
secondary claim for relief from the third-party defendant, there are other limitations on
said party's ability to implead. The rule requires that the third-party defendant is "not a
party to the action" for otherwise the proper procedure for asserting a claim against one
who is already a party to the suit is by means of counterclaim or
cross-claim under sections 6 and 7 of Rule 6. In addition to the aforecited requirement, the
claim against the third-party defendant must be based upon plaintiff's claim against the
original defendant (third-party claimant). 3 The crucial characteristic of a claim under
section 12 of Rule 6, is that the original "defendant is attempting to transfer to the
third-party defendant the liability asserted against him by the original plaintiff. 4
In Capayas v. Court of First Instance 5 this Court enunciated the same principle, when the
court ruled: "... when the law says that a third-party complaint may be filed with leave of

court, it refers to a complaint that alleges facts which prima facieshow that the defendant is
entitled against the third-party defendant to contribution, etc., etc. Otherwise the court can
not legally grant leave to a defendant to file it, because it would not be a third-party
complaint... The test to determine whether the claim for indemnity in a third-party
complaint, "in respect to plaintiff's claim" is, whether it arises out of the same transaction
on which the plaintiff's claim is based, or the third-party's claim, although arising out of
another or different contract or transaction, is connected with the plaintiff's claim."
The requirement that for a third-party complaint to be available the third-party defendant
must be liable secondarily to the original defendant in the event that the latter is held liable
to the plaintiff was reiterated in Commercial Bank & Trust Company of the Philippines v.
Republic Armored Car Service Corp. 6 where this Court thru Justice Labrador ruled that "a
third-party complaint is, under the Rules, available only if the defendant has a right to
demand contribution, indemnity, subrogation or any other relief from the supposed thirdparty defendants in respect to the plaintiff's claim."
Absent therefore in the case at bar the nexus between petitioners as third-party defendants
and Francisco E. Fernandez, the third-party plaintiff, showing the existence of a secondary
or derivative liability of the former in favor of the latter "in respect of his opponent's claim"
the third-party action would not be proper.
On the issue therefore, as to whether or not section 12 of Rule 6 of the Rules authorizes a
defendant to bring into the case any person not a party to the action, who is not secondarily
liable to said defendant for contribution, indemnity, subrogation or any other relief in
respect to the claim of the plaintiff against the defendant, the answer appears plain. In the
context of the aforecited rule and applicable jurisprudence the answer must be in the
negative.
II
Countervailing policy considerations, however, in view of the factual environment such as
the equity rule against multiplicity of suits precludes Us from reversing the challenged
decision.
As aptly stressed by the Appellate Tribunal, "it is admitted that both the plaintiffs and the
third-party defendants ... are the common lessees of the 10-door apartment the ownership
of which is being litigated between defendant Angela M. Butte and third-party plaintiff
Francisco E. Fernandez. As such lessees they have the same problem of determining the
right person to whom they should pay the corresponding rents of the particular doors they
are occupying. Because of the raging conflict between the defendant Angela M. Butte and
third-party plaintiff ultimately they would resort to an action for interpleader against the
conflicting claimants of the subject property. To require each of the petitioner to file an
action for interpleader against the conflicting claimants of the subject property will
undoubtedly go against the rule on multiplicity of suits... In our assessment of the facts and
circumstances, We are convinced that the respondent court did what it considered was
necessary to shorten the litigation between the parties by allowing them in one single

proceeding and avoiding multiplicity of actions." The correctness of this factual observation
cannot be seriously disputed. Of course petitioners suggest that the question as who should
be entitled to collect the rentals of the apartment must be ventilated in the case for
rescission and damages between Angela M. Butte and Francisco E. Fernandez, pending
before another court, but such a suggestion does not solve the problem. It cannot be denied
that Civil Case No. Q-13292, subject of this appeal by certiorari, presents only one question,
and that is who of the defendants therein are entitled to collect the rentals?
Undoubtedly, it would be to the interests of all concerned, if all of the tenants of the
10-door apartment were included in the suit. The findings of the Appellate Court that
petitioners are, all common lessees of the apartment is conclusive upon Us. The inclusion of
the other tenants would necessarily do away and avoid the filing of independent actions,
with the inevitable trouble, expense and loss of time it would entail. The leading principle
in our system of procedure is the avoidance of multiplicity of suits and whenever possible,
to permit and sometimes require the parties to thresh out in one litigation all claims which
arise out of the same transaction.
Faithful adherence to the aforecited principle compels Us to view the inclusion of
petitioners not as third-party defendants but as proper parties in the action because "there
is a question of law or fact common to the right or duty in which" they are "interested and
another right sought to be enforced in the action." 7 The act of the court a quo in permitting
their joinder is sanctioned by section 6 of Rule 3 of the Revised Rules of Court. Section 6,
which is taken from Rule 20 (a) and (b) of the Federal Rules of Civil Procedure, "is based on
trial convenience and is designed to permit joinder of plaintiffs or defendants whenever
there is a common question of law or fact." 8 Since rules on joinder of parties must be
allowed considerable flexibility to meet the requirements of justice and convenience and
considering the broad discretion of the Courts in determining who are properly to be
joined, the action of the trial court in the case at bar allowing the joinder of petitioners, to
settle in the most convenient manner the question as to whom the tenants should pay the
rentals, in one single proceedings could not therefore be considered as a grave abuse of
discretion.
WHEREFORE, finding no error in the decision of the Court of Appeals now under review,
the petition is hereby dismissed. Without costs.

G.R. No. L-30404 January 31, 1973

MIGUEL PEREZ RUBIO, petitioner,
vs.
HON. JUDGE HERMINIO MARIANO, in his capacity as Presiding Judge of Branch X, of
the Court of First Instance of Rizal, ROBERT O. PHILLIPS & SONS, INC., ROBERT O.
PHILLIPS, MAGDALENA YSMAEL PHILLIPS, VICTORIA VALLEY DEVELOPMENT
CORPORATION, MANUFACTURERS BANK & TRUST COMPANY and HACIENDA BENITO,
INC., respondents.

Jose W. Diokno Law Offices for petitioner.

Ambrosio Padilla Law Offices for respondent Bank.
Alberto O. Villaraza for respondent Victoria Valley Development Corporation.
Magtanggol C. Gunigundo for other respondents.

MAKALINTAL, J.:
Petition for certiorari to review and set aside the order dated September 13, 1968 issued
by the respondent Judge in Civil Case No. 8632 of the Court of First Instance of Rizal
(Branch X) entitled "Robert O. Phillips & Sons, Inc., et al. vs. Miguel Perez Rubio," denying
the motion of the defendant (now herein petitioner, Miguel Perez Rubio) to admit his
amended and supplemental answer and third-party complaint, and to set aside as well the
subsequent order denying his motion for reconsideration. Pending determination of the
issues raised here the petitioner prayed that respondent Judge be restrained from
proceeding with the hearing of the case below and the other respondents from transferring
or proceeding with the agreement to transfer any of the assets of Hacienda Benito, Inc., to
any third person except in the ordinary course of selling subdivision lots. On April 16, 1969
this Court caused to be issued a temporary restraining order as prayed for.
The present case is really a direct offshoot of an earlier case (Rubio vs. Reyes, et al., L24581, May 27, 1968, 23 SCRA 773) involving practically the same contending parties. In
that case this Court, resolving Miguel Perez Rubio's primary plea in his petition
for certiorari to annul a writ of preliminary injunction issued ex-parte in Civil Case No.
8632, rendered judgment in part as follows:
(1) In connection with the writ of preliminary injunction issued by the respondent Judge in
Civil Case No. 8632 ..., the same is hereby declared null and void and is, consequently, set
aside ...;
We considered the ex-parte issuance of the voided writ of preliminary injunction to be
"unjust and improvident" because: "(W) without hearing the party concerned, and without
any legal justification, it restrained a creditor (Perez Rubio) from enforcing his undenied
right to collect from his debtor and the latter's guarantors the sum of P4,250,000.00
representing the unpaid balance of the purchase price of his shares in Hacienda. It is a fact
that the debtor Corporation (Robert O. Phillips and Sons, Inc.) and its guarantors, the
Phillips spouses, do not deny the indebtedness, and yet, notwithstanding its extraordinary
amount, they attempted to sell all the shares of stock of Hacienda without making any
reasonable provision for the payment thereof. For them to prevent their creditor from
enforcing that right in any lawful manner is, in any language, rank injustice."

But, as noted in the same decision, in view of certain complicated matters, 1 that cropped up
after the filing of the original petition in G.R. No. L-24581, which new matters were brought
to the attention of this Court by Miguel Perez Rubio by means of several supplemental
petitions 2, the scope of the petition in G.R. No. L-24581 as originally filed, i.e., mainly to
annul the writ of preliminary injunction issued ex-parte in Civil Case No. 8632, was actually
enlarged to include a plea to annul the proceedings had in a separate judicial foreclosure of
mortgage case (Civil Case No. 8766, Court of First Instance of Rizal, Branch VIII) instituted
by the Manufacturers Bank and Trust Company against the properties of the Hacienda
Benito, Inc. Miguel Perez Rubio then claimed that the foreclosure by the bank of the
mortgage constituted on the properties of the Hacienda Renito, Inc., was intended simply to
remove the said properties and the assets of the Hacienda's guarantors the Phillips
spouses beyond his reach and thus make it impossible for him to collect the sum of
P4,250,000.00 still unpaid on the purchase price of his shares in Hacienda sold by him to
the Phillips corporation. On this particular aspect of the case We made this observation:
... it is undeniable that the situation created by the acts admittedly done by the respondents
in connection firstly, with the proposed sale of the shares of stock of Hacienda to Alfonso T.
Yuchengco and his group, and secondly, with the conveyance of the properties of Hacienda
to the Bank and the contemplated conveyance thereof to VVDC placed petitioner's right and
ability to collect the sum of P4,250,000.00 still due to him from the Phillips corporation and
its guarantors, the Phillips spouses, in clear jeopardy, (and) it is our considered opinion in
this regard that petitioner is entitled, both in law and equity, to a measure of protection
compatible with fairness towards the respondents while in the process of taking
whatever steps maybe necessary for the enforcement and protection of his rights.
We nevertheless denied the writ of certiorari prayed for "... insofar as it seeks to annul the
judicial proceedings had in Civil Case No. 8766 of the Court of First Instance of Rizal,
instituted by the Bank against Hacienda and other parties for the foreclosure of the
mortgage constituted in its favor upon the properties of Hacienda." Conformably, however,
with Our view that Miguel Perez Rubio should be entitled, both in law ad equity, to a
measure of protection. We specifically declared that Our denial of the writ of certiorari was
"... without prejudice ... to the right of petitioner to seek such relief and any other relief that
he might be lawfully entitled to against the herein respondents, singly or collectively, in the
aforementioned Civil Case 8766 of the Court of First Instance of Rizal or in a separate action.
..." (emphasis supplied). It was against the foregoing backdrop that the instant case arose.
Believing that the forum for the "separate action" referred to in the dispositive portion of
Our decision in G.R. No. L-24581 meant Civil Case No. 8632 which has remained pending in
the court a quo, Miguel Perez Rubio filed in the said case on July 9, 1968 an "Urgent Motion
To Admit Amended and Supplemental Answer and Third-Party Complaint," the third-party
complaint being directed against the Manufacturers Bank and Trust Company, the Victoria
Valley Development Corporation and the Hacienda Benito, Inc. The amended and
supplemental answer recited the same matters which Miguel Perez Rubio had already
alleged in his supplemental petition filed in this Court in G.R. No.
L-24581, thereafter summarized in Our decision therein as follows:

That after the respondent Judge had denied petitioner's (Miguel Perez Rubio) motion to
dissolve the writ of preliminary injunction issued in Civil Case No. 8632, and sensing that
the latter would take up the matter to Us for review, on June 3, 1965 the Articles of
Incorporation of the respondent VVDC were drawn up, and filed with the Securities and
Exchange Commission the following day, ...; that on June 10, 1965 the Bank filed a
complaint dated May 31, 1965 against (1) Hacienda, (2) Compound Investment
Corporation, (3) Corregidor Development Corporation, (4) Robert O. Phillips and Sons, (5)
Crescent Corporation and (6) Francisco D. Santana to foreclose the real estate mortgage
constituted on the properties of Hacienda to secure not only its own obligations but also
those of other corporations and business enterprises of Robert O. Phillips, ... (Civil Case No.
8766 of the Court of First Instance of Rizal); that instead of filing an answer to the
complaint the defendants in said case entered into a compromise agreement dated June 17,
1967 whereby: (a) Hacienda agreed to convey and assign its properties covered by the
mortgage and to assign all receivables due to it from the buyers of lots in its subdivisions,
to the Bank in payment not only of its own mortgage debt but also of the other defendants;
(b) Hacienda was subrogated to all the right and interest of the Bank under the deeds of
mortgage being foreclosed in respect of its co-defendants; (c) Hacienda waived its right to
redeem its properties thereby transferred or sold to the Bank; that on June 21, 1965, the
Phillips individuals and corporation received notice of our resolution of June 15, 1965
giving due course to the original petition filed in this case and requiring the petitioner
therein to put up the bond required for the issuance of the writ of preliminary injunction;
that this notwithstanding, ... Hacienda, through Robert O. Phillips, executed a deed of
absolute sale of its properties in favor of the Bank in payment of the amounts due from all
the defendants; that ... the deed of sale was registered in the Office of the Register of Deeds
of Rizal, the consideration appearing thereon being the total sum of P7,485,492.98
representing the mortgage debts of all the defendants, plus costs and attorney's fees; that
since July, 1965 the newly-organized VVDC had in fact been managing the Victoria Valley
Subdivision which Comprises the properties of Hacienda, payment of receivables from the
purchasers of lots being made directly to it or to the Bank; that the aforesaid purchase price
of the properties of Hacienda was grossly inadequate ...; that the deed of sale also deprived
Hacienda of its right to redeem the mortgaged properties; that the foreclosure proceedings,
the compromise agreement and the sale mentioned heretofore were a scheme to
circumvent and avoid the legal effects of the writ of preliminary injunction issued by Us in
the present case and would, in effect, render valueless all the shares of Hacienda; that all
the aforesaid foreclosure suit, compromise agreement and sale were calculated to produce
the same result which could have been accomplished by Phillips and Sons, Inc. selling all
the shares of Hacienda to Yuchengco and his group; that these proceedings and
transactions amounting to a virtual disposal of all the assets of the Phillips spouses and of
Robert O. Phillips and Sons, Inc. were in fraud of petitioner, their creditor, who would then
have penniless debtors from whom he could not collect the unpaid balance of
P4,250.000.00 due to him; that considering the fact that a good number of the members of
the Board of the Bank were also members of the Board of VVDC, these corporations must
be deemed to have had knowledge of the scheme just described and of the action taken by
some of the members of their Board in furtherance thereof."

Meanwhile the third-party complaint, substantially reiterating the above-mentioned

allegations, sought to secure the return by the Bank and/or the VVDC of the properties it
and/or they had bought as a consequence of the judicial foreclosure of mortgage case (Civil
Case No. 8766), with a further plea that "in the event that the Phillips are unable to pay
(Miguel Perez Rubio) the judgment on his counterclaim said properties and funds returned
by the defendant Bank be held to answer for such judgment or any part thereof unpaid by
the Phillips," together with damages. On the same date, July 9, 1968, Miguel Perez Rubio
urgently moved the court a quo for the issuance of writs of preliminary injunction, both in
the amended and supplemental answer as well as in the third-party complaint, intended to
prevent the Phillips spouses and the impleaded third-party defendants from performing
acts that would deplete the assets of Hacienda Benito, Inc.
In due time respondent Phillips spouses filed their twin opposition to the admission of the
amended and supplemental answer and the third-party complaint, pleading the following
grounds: (a) that the dispositive portion of the decision in G.R. No. L-24581 granting Miguel
Perez Rubio the right to seek relief in Civil Case No. 8766 "... or in a separate action" meant
that the choice of forum given Miguel Perez Rubio was limited to Civil Case No. 8766 or an
action other than Civil Case No. 8632; (b) that the proper forum in fact was in Civil Case No.
8766, the foreclosure of mortgage case in which the Phillips spouses voluntarily ceded to
the Bank 78 hectares of Hacienda Benito, Inc.'s property known as the Victoria Valley
Subdivision to pay for all the obligations of the Phillips and of their affiliate corporations
for which the ceded assets of Hacienda Benito had been mortgaged; (c) that the additional
allegations in the amended and supplemental answer relating to supervening events which
allegedly operated to defraud Miguel Perez Rubio by depriving him of adequate security to
recover on his credit changed Miguel Perez Rubio's cause of action as alleged in the
counterclaim, i.e. the Phillips spouses' alleged indebtedness of P4,250,000.00.
Hacienda Benito, Inc., in the meantime, opposing Miguel Perez Rubio's application for a
writ of preliminary injunction, adopted as its own the arguments adduced by Phillips, while
the VVDC objected to the issuance of the writ of preliminary injunction on the main ground
that not having yet been formally served with summons on the third-party complaint, it
may not properly be subjected to the writ. The Manufacturers Bank and Trust Company, on
the other hand, entered a special appearance solely to oppose both the urgent motion for
the issuance of the writ of preliminary injunction and the motion to admit the third-party
complaint. The Bank reiterated VVDC's argument that injunction was not proper as against
it until the third-party complaint had been admitted or allowed; and in opposition to the
admission of the third-party complaint it pointed out: (a) that the Bank may not be made a
third-party defendant since it could not stand liable for contribution, indemnity or
subrogation or any other relief which the original plaintiffs in Civil Case No. 8632 may
obtain against Miguel Perez Rubio; (b) that whatever it had done, i.e. foreclose the
mortgage constituted on the Hacienda Benito properties, was legally unassailable for it had
merely taken steps to protect its interest as mortgagor; and (c) that the respondent Judge
in Civil Case No. 8632 did not have jurisdiction to look into the validity of the proceedings
in Civil Case No. 8766 heard and decided by Branch VIII of the same Court of First Instance
of Rizal in Pasig.

In Miguel Perez Rubio's reply to the opposition of the Phillips spouses and Hacienda Benito,
Inc. to the admission of the amended and supplemental answer as well as of the third-party
complaint, he maintained (a) that in G.R. No. L-24581 he was given the choice of forum
where to seek relief, and that instead of seeking annulment of the foreclosure in Civil Case
No. 8766 he opted to ventilate his claim in the pending case below; (b) that the amended
and supplemental answer did not alter his cause of action on the counterclaim since the
basis of all the allegations therein stemmed from his right to collect the sum due him, and
the reference to certain transactions entered into by the Phillips and spouses with the
third-party defendants was intended simply to point out the consequent impossibility on
the part of the Phillips spouses to make the necessary payment; (c) that since the
foreclosure of mortgage case (Civil Case No. 8766) did not proceed to trial but was settled
before an answer could even be filed, there were no judicial proceedings that would have to
be set aside; and (d) that the real issue involving Miguel Perez Rubio and the Phillips
spouses was the propriety and/or validity of the agreement dated June 5, 1965 whereby
the Phillips spouses and the third-party defendants conspired to defraud the petitioner.
In justifying his filing of the third-party complaint, Miguel Perez Rubio argued, in his reply
to the opposition of the Bank and the VVDC, that a third-party complaint was proper not
only when the intended third-party defendant is liable for subrogation or contribution on
defendant's counter-claim but also" ... where even if the action that may be taken against a
third-party defendant is unrelated to plaintiff's claim against the third-party plaintiff or
defendant, (it appears that) the third-party is a necessary party to the case or one without
whose intervention the real issue involved cannot be fully determined ..." citing the case
of Baluyot vs. Court of Appeals, 106 Phil. 844. He further reiterated that the Bank's
arrangements with the Phillips spouses were of such a fraudulent character that they
prevented the latter from paying Miguel Perez Rubio or from returning even the object of
the Phillips' indebtedness, which was 50% of the shares of stock of Hacienda Benito, Inc.
formerly owned by Miguel Perez Rubio and bought on installment by the Phillips.
On September 13, 1968 the respondent Judge issued an order denying the admission of the
amended and supplemental answer and the third-party complaint mainly on the ground
that to resolve the issues regarding the alleged fraudulent transactions entered into by the
plaintiffs and the third-party defendants in order to prevent Miguel Perez Rubio from
enforcing his admitted credit would necessarily involve, in one way or another, the
proceedings had in a coordinate and co-equal court which had in fact been terminated in
Civil Case No. 8766. In addition, the respondent Judge viewed the additional matters
alleged in the amended and supplemental answer and in the third-party complaint as
irrelevant to the principal issue raised by the Phillips in the complaint, which was whether
or not Miguel Perez Rubio unlawfully interfered with the plaintiffs' transactions with
Alfonso Yuchengco, and to the main issue raised by Miguel Perez Rubio in his counterclaim,
i.e. whether or not the Phillips spouses are liable for the balance of P4.25 million in favor of
Miguel Perez Rubio. A motion for reconsideration having been denied on November 21,
1968, Miguel Perez Rubio commenced the instant petition for certiorari, posing the central
issue, as he saw it, in this wise: "May your petitioner implead the respondents Victoria
Valley Development Corporation, Manufacturers Bank and Trust Company, and the

Hacienda Benito, Inc. in Civil Case No. 8632 where your petitioner has a compulsory
counterclaim against respondents Phillips on the shares of stock sold by your petitioner?"
In due time the herein respondents filed their respective answers. The answer to the
petition filed by the respondent Judge, by Robert O. Phillips the corporation and the
individuals and by Hacienda Benito, Inc., admits some of the material averments in the
petition and specifically denies the others, particularly the propriety of the petition
for certiorari availed of by petitioner. To support said denials or by way of special and
affirmative defenses the answer further alleges: that the instant petition for certiorari with
preliminary injunction should not have been given due course since it was filed after
petitioner had already lost his right to appeal the disputed order, it appearing from the
records that the said order, dated September 13, 1968, was received by the petitioner on
October 12, 1968 and the motion for its reconsideration was filed on November 18, 1968,
the 37th day from receipt thereof, and not on November 11, 1968 as the petitioner alleged;
that similarly, the petitioner let more than two (2) months pass from receipt of the denial
of his motion for reconsideration before he commenced the instant petition on April 12,
1969; that the right to appeal having been lost through inaction and/or
negligence,certiorari may not be availed of as a substitute for appeal; that in fact the court
below had even lost jurisdiction to reconsider its original order dated September 13, 1968
in view of the lapse of the reglementary period within which the same might be
reconsidered and/or appealed, it appearing that the motion for its reconsideration was
filed on the 37th day from receipt of the assailed order; that since an order denying
admission of an amended pleading or a third-party complaint is appealable, the petitioner's
failure to appeal within the allowable period meant that the assailed order may no longer
be impugned; that the dominant issue raised in the instant case, i.e. whether or not the
respondent Judge committed a grave abuse of discretion amounting to excess of
jurisdiction in denying admission of the amended and supplemental answer and the thirdparty complaint, had in fact already been resolved in the earlier related case of Rubio vs.
Reyes, supra, when the Supreme Court ruled that any relief to which Miguel Perez Rubio
might be lawfully entitled to may be sought in "Civil Case No. 8766 of the Court of First
Instance of Rizal or in a separate action," necessarily implying that the alleged fraudulent
actions on the part of the respondents which matters were earlier alleged in the Second
Supplemental Petition filed in G.R. No. L-24581 and repeated in the amended pleading and
third-party complaint whose admission in the court a quo is being sought had already
been determined to be proper subject-matter either in Civil Case No. 8766 or in a separate
action other than Civil Case No. 8632; that the admission of the amended pleading and the
third-party complaint, if permitted, would involve an inquiry by the respondent Judge into
the legality and/or propriety of the proceedings had in Civil Case No. 8766, tried by a
coordinate and co-equal court, which could not be properly done in view of the rule that
the jurisdiction to annul a judgment of a branch of the Court of First Instance belongs not to
another co-equal and coordinate court; that assuming that the argument of noninterference by one branch with the action of another branch of the same court could be
overcome, the respondent Judge nevertheless did not abuse his discretion in denying
admission of the amended and supplemental answer and third party complaint because the
former substantially altered Miguel Perez Rubio's cause of action since the original
counterclaim related only to the payment of the alleged indebtedness of P4,250,000.00

while the amended pleading seeks a writ of preliminary injunction with respect to a
transaction which is not involved in the counterclaim for the payment of the said
indebtedness, and the third-party complaint seeks (a) the annulment of certain processes
in Civil Case No. 8766, particularly the memorandum agreement dated June 5, 1965, ceding
the properties of Hacienda to the Bank which cession, as maintained by the petitioner, was
made in fraud of creditors and (b) the return of the same properties to Hacienda all
these matters being completely irrelevant to petitioner's counterclaim for his totally
unsecured credit; that the third-party complaint under the foregoing set-up may not be
admitted without violating the applicable rule (section 12, Rule 6) which requires that
third-party complaint must be so related to the plaintiff's claim against the defendant that
the third-party defendant may actually stand liable for contribution, indemnity,
subrogation or any other relief, in respect of his (referring to the original defendant and/or
third-party plaintiff) opponent's claim. Lastly, by way of compulsory counterclaim, the
answering respondents alleged that as a result of the petitioner's bad faith in instituting the
present petition they suffered damages for which they should be adequately compensated.
The VVDC for its part, after making admissions and specific denials in its answer,
particularly takes exception to the propriety of the instant petition for certiorari with a plea
for preliminary injunction, stressing that the assailed orders could have been the subject
only of review by appeal and that, in any event, the denial of the admission of the amended
and supplemental answer and the third-party complaint had already become final since the
records showed that a motion for its reconsideration was filed beyond the reglementary
period for filing the same; that although the instant petition was labeled as one
for certiorari, it was in effect one for a writ of mandamus to compel the respondent Judge to
admit the petitioner's amended and supplemental answer below, as well as the third-party
complaint and thereafter to proceed with the case, which writ would not be available since
the controverted orders were issued by the respondent Judge in the exercise of his
discretion. The prayer for preliminary injunction, VVDC claims, has no basis in law insofar
as it is concerned for the reason that since it has been legally joined as a party in the
principal case below (Civil Case No. 8632) no action may be said to have been commenced
against it for which it may be subject to a writ of injunction. VVDC further avers "(It is)
being brought into these proceedings merely as a prospective purchaser. ... (Likewise) if, as
a matter of good law, injunction could be available to the petitioner, then an order of
restraint upon the prospective seller would be more than sufficient to protect the rights of
the petitioner Miguel Perez Rubio, without the need of harassing a would-be purchaser and
compelling it to litigate together with the attendant inconveniences and expenses."
The Manufacturers Bank and Trust, Co., Inc., in its answer to the present petition, also made
admissions and specific denials of the material averment of the petition. Its extensive
allegations may be summarized as follows: that the assailed orders denying the admission
of the petitioner's amended and supplemental answer and the third-party complaint are
not proper subjects for a petition for certiorari because: (a) appeal was available to
petitioner from the order dated September 13, 1968 and it is well-settled
that certiorari cannot be availed of as a substitute for appeal; (b) by failing to appeal within
the reglementary period, petitioner had likewise lost his right to avail himself of the special
remedy of certiorari; and (c) the orders sought to be reviewed were validly and legally

issued on the basis of the attendant circumstances. It is further claimed that insofar as the
Bank is concerned, the pertinent inquiry is whether or not the petitioner may implead
by means of a third-party complaint the answering respondent Bank in the original case
where petitioner, as party defendant therein, has a compulsory counterclaim against the
plaintiff. Submitting a negative position, the Bank argues that a third-party complaint may
not be introduced if the same would effect a new and separate controversy from that
involved in the original action. If included as third party defendant, the Bank, it is pointed
out, will be unable to assert any defense which Miguel Perez Rubio has or may have against
the plaintiffs' claim. Furthermore, the third-party complaint, if allowed admission, would
virtually operate to reopen discussion of the merits of an already terminated case (Civil
Case No. 8766) tried by a co-equal branch of the court a quo. Specifically referring to the
instant petition, the Bank maintains that not being "otherwise a party to the original
proceedings, it cannot be made a party in acertiorari petition and in that petition be
enjoined ..."
From the welter of pleadings filed by the contending parties, the fundamental issue herein
presented is the propriety or impropriety of the amended and supplemental answer and of
the third-party complaint.
According to the order in question, dated September 13, 1968, the respondent Judge
refused to admit both pleadings in order to avoid what he viewed as a possible invasion of
the jurisdiction and authority of another branch of the court, which is co-equal and
coordinate, and also in the belief that the new matters touched upon particularly in the
amended and supplemental answer would merely delay the disposition of the main issue
raised by the plaintiffs below, i.e., whether or not Miguel Perez Rubio unlawfully interfered
with the plaintiffs' transaction with one Alfonso Yuchengco, as well as of the issue raised by
Miguel Perez Rubio in his counterclaim, i.e., whether or not the plaintiffs are liable to him
for the balance of P4.25 million.
We do not share the respondent Judge's conclusions. In his original answer Miguel Perez
Rubio prayed for the dismissal of the complaint and for judgment against the Phillips in the
sum of P4.25 million, which admittedly they owe him, plus damages. On the other hand, the
amended and supplemental answer which was sought to be admitted prays additionally
that:
1. Pending the hearing of this case (that) a restraining order or a writ of preliminary
injunction be issued against the plaintiffs or any of their servants, agents or persons acting
for and in their behalf restraining them from:
a) proceeding with the sale of the shares of stock of Hacienda Benito, Inc., or of any of its
assets to Alfonso Yuchengco or to any person save in the ordinary sale of subdivision lots;
and
b) performing any act which will either diminish the value of said shares or deplete the
assets of said Hacienda;

2. In the alternative, should this injunction not be possible, a writ of preliminary

attachment be issued against the properties of plaintiffs in such value as will properly
guaranty the payment of P4.2 million plus 8% interest thereon since April 30, 1964
continuing until the final termination of this case;
3. After hearing, judgment be rendered in favor of your defendant
a) Making the above injunction, if granted, permanent;
xxx xxx xxx
The additional plea was the logical consequence of Miguel Perez Rubio's allegations in the
amended and supplemental answer of relevant facts which occurred subsequently to the
filing of the original answer. To be sure, these additional facts tend to place in issue the
propriety of the judicial foreclosure (Civil Case No. 8766) effected by the Manufacturers
Bank and Trust Co. against the properties of the Hacienda Benito, Inc. But this fact alone
hardly suffices to warrant a finding that the amended and supplemental answer sought to
be admitted alleges a cause of action different from that originally pleaded.
The rule regarding amendments to the complaint and mutatis mutandis to the
counterclaim has been stated by this Court as follows: "(I)n determining whether a
different cause of action is introduced by amendments to the complaint, what is to be
ascertained is whether the defendant shall be required to answer for a liability or legal
obligation wholly different from that which was stated in the original complaint. An
amendment will not be considered as stating a new cause of action if the facts alleged in the
amended complaint (or counterclaim) show substantially the same wrong with respect to
the same transaction, or if what are alleged refer to the same matter but are more fully and
differently stated, or where averments which were implied are made in expressed terms,
and the subject of the controversy or the liability sought to be enforced remains the same."
(Shaffer vs. Palma, L-24115, March 1, 1968; 22 SCRA 934) In the instant case, the extensive
recitals regarding certain events which transpired after the original answer had been filed
are obviously intended to emphasize the resulting difficulty on the part of Miguel Perez
Rubio to collect from the Phillips their admitted indebtedness. The narration of the steps
allegedly taken by the debtors to make it extremely hard, nay highly improbable, for Miguel
Perez Rubio's counterclaim to be satisfied, does not necessarily mean or imply that a new
cause of action has been pleaded. The counterclaim remains the same, namely: to obtain
payment of the indebtedness of the Phillips. In other words, what is being enforced against
the Phillips, both in the original answer and in the amended and supplemental answer, is
the obligation to pay the Perez Rubios. This amended and supplemental answer should
have been admitted.
Referring this time to the propriety of the third-party complaint, there appears at first
blush to be some merit in the contention of the respondents (third-party defendants), since
there is no demand from them for contribution, indemnity, subrogation or any other relief
in respect of the plaintiffs' claim, (Rule 6, Sec. 12), which is to stop Miguel Perez Rubio from
interfering with a certain transaction between the said plaintiffs and a third person. What

the third-party complaint seeks is to hold the third-party defendants directly liable to the
third-party plaintiff for damages for alleged fraudulent acts which would render his
counterclaim against the plaintiffs unrecoverable.
However, Miguel Perez Rubio has been accorded by this Court the right to seek protection
of his credit for the unpaid balance of the price of his shares in Hacienda which he had sold
to the Phillips which credit has been jeopardized by the acts of the plaintiffs and the
third-party defendants. It would be an exercise in futility to allow Miguel Perez Rubio's
counterclaim against the plaintiffs to remain in the case (No. 8632) for adjudication by the
Court and at the same time throw out his third-party complaint against third persons for
acts which would prevent such counterclaim from being realized because by said acts the
plaintiffs' assets are placed beyond the counter-claimant's reach. It bears repeating that
those acts took place after Miguel Perez Rubio filed his petition in this Court in L-24581,
and in doing them the parties now sought to be impleaded as third-party defendants in
effect made common cause with the plaintiffs "conspired amongst themselves' as
stated by Us in Our decision in that case. Having thus entered into transactions with respect
to things then under litigation, they have no cause to complain if they are brought in as
parties.
We do not believe that it would serve the ends of justice or of a prompt dispatch of the
controversies and issues involved to affirm the orders herein challenged and cause an
entirely new action to be commenced. The main dispute below has been delayed long
enough for reasons that can be attributed to the plaintiffs and the third-party defendant.
The same policy considerations against multiplicity of suits which prompted this Court
in Balbastro, et al. vs. Court of Appeals, et al., L-33255, November 29, 1972, to affirm the
admission of the third-party complaint therein involved despite a finding of its procedural
infirmity, likewise obtain in this case. Besides, the bringing in of the herein private
respondents as third-party respondents in the case below is in accordance with sections 14
and 15, Rule 6 of the Rules of Court, which provide:
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.
SEC. 15. Liberal construction. All pleadings shall be liberally construed so as to do
substantial justice.
With respect to the argument that to admit the third-party complaint would amount to an
invasion of the jurisdiction of a co-equal branch of the court in the mortgage foreclosure
case (Civil Case No. 8766) suffice it to point out that the so-called decision therein was
nothing but to approve a memorandum-agreement (dated June 5, 1965) between the
Phillips and the MBTC whereby the former transferred to the latter certain properties as
payment for the indebtedness of the Phillips and their affiliate companies. There was no
contentious litigation; what the court did was simply to declare that the mortgage debt had
been satisfied by means of sale or cession of properties, without ruling on any adversary

claims of the parties. It cannot be considered a judgment which is beyond question, even in
another court. Otherwise, it might be putting a premium on legal stratagem and subterfuge.
WHEREFORE, the orders complained of are set aside and respondent Judge or whosoever
is assigned to try the case below is instructed to admit the amended and supplemental
answer and third-party complaint filed by Miguel Perez Rubio. Thereafter, these cases shall
proceed accordingly. The restraining order herein before issued by this Court is hereby
lifted insofar as it restrains respondent Judge from proceeding with the hearing of Civil
Case No. 8632 of the Court of First Instance of Rizal, Branch X (Pasig, Rizal), and maintained
insofar as it restrains (the other respondents) "from proceeding with the transfer of the
shares and/or of the assets of Hacienda Benito, Inc. to each other or to any other person,
except in the ordinary course of selling subdivision lots," without prejudice to the judgment
that may be rendered by the court a quo in the case. Costs against the respondents.

G.R. No. 130699 May 12, 2000

SPOUSES BERNARDO MERCADER and FLORINA M. MERCADER, and DR. JUAN Y.
MADERAZO, petitioners,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES (CEBU BRANCH), GELACIO, FELIPE,
OSMUNDO all surnamed MANREAL, and RUFINA MANREAL VDA. DE
ABALO, respondents.

DAVIDE, JR., C.J.:

In this petition for review, petitioners spouses Florina Maderazo-Mercader and Bernardo
Mercader (hereafter MERCADERs) and Juan Y. Mederazo impugn the Court of Appeals' 5
February 1997 decision in CA-GR-CV No. 21846 1 ordering them to deliver the possession
of Lot No. 2985 to the Development Bank of the Philippines, Cebu Branch (hereafter DBP)
without right of reimbursements for the improvements introduced thereon, and the 13
August 1997 resolution denying the motion for reconsideration. Said decision and
resolution reversed and set aside the 6 September 1988 decision 2 of the Regional Trial
Court of Cebu, Branch 15, in Civil Case No. R-18521.3
Civil Case No. R-18521 was for specific performance filed on 28 September 1979. In their
complaint, 4 the MERCADERs alleged that:

(1) In 1966, Juan Maderazo applied for a loan at the DBP secured by interior Lots Nos. 2993
and 2994 (Talisay-Minglanilla estate);
(2) The DPB required Maderazo to construct a five (5) meter wide road right of way
over the adjoining Lot No. 2985;
(3) The DBP approved Maderazo's loan application upon his submission of a copy of the
lease contract for a right of way over the adjoining Lot No. 2985;
(4) The lease contract for the right of way was for a twenty-year period commencing on 20
October 1966 which Maderazo executed with the spouses Gelacio and Vicenta Manreal,
then the registered owners of Lot No. 2985;
(5) Maderazo expended P10,000 for the construction of the five (5) meter right of way;
(6) This lease contract was however not registered for Gelacio Manreal's failure, "for one
reason or another," to deliver the Certificate of Title (TCT) of Lot No. 2985 to Maderazo;
(7) About nine years later or on 6 January 1976, Maderazo's children, the spouses Florina
Maderazo-Mercader and Bernardo Mercader executed a contract of lease with the Manreals
for a period of twenty years and four months over the remaining portion of Lot No. 2985;
(8) Despite repeated requests for the delivery of the TCT of Lot No. 2985 for the purpose of
annotating the lease contract, the Manreals, "for one reason or another," failed to do so;
however, the Manreals assured the Mercaders "not to worry since nothing will go wrong";
(9) Believing in the Manreals' assurances, Bernardo Mercader intensively cultivated Lot No.
2985, "planted in good faith 600 calamansi fruit trees, fenced the lot with barbed wires,
constructed canals and drainages, spent wages for several farm workers and introduced
several improvements including a vegetable garden all in the sum of not less that
P25,000";
(10) The MERCADERs subsequently discovered that the reason why the Manreals failed to
deliver the TCT of Lot No. 2985 [now registered in the names of spouses Felipe and
Florentina Manreal, children of Gelacio and Vicenta Manreal] was because they offered said
lot including the improvements introduced by the former thereon as "collateral" for a
P150,000 deep-sea fishing loan with the DBP;
(11) That despite the lack of registration and/or annotation of the respective interests of
the MERCADERs on the TCT over Lot No. 2985, the DBP knew and should know of their
existence considering the several ocular inspection and investigation conducted over the
property; the DBP's actual knowledge of these unregistered interests has the effect of
registration. 5
Since the Manreals defaulted in the payment of their obligation to the DBP, and that the
latter had taken steps to foreclose Lot No. 2985 including all the improvements thereon,

the MERCADERs prayed among others, for the DBP to "respect their interests by excluding
these from the foreclosure proceedings, or if the foreclosure takes place, declare the same
null and void or in the alternative, order the DBP to reimburse them the cost of the
improvements and loss of expected income amounting to P210,000 for the duration of the
unexpired term of their respective contracts." The MERCADERs also prayed for the
annotation of their interests in the TCT of Lot No. 2985.
In their answer, the Manreals only admitted the existence of the two unregistered contracts
of lease and the calamansi trees planted on Lot No. 2985. They then denied any knowledge
or information sufficient to form a belief on the other allegations of the MERCADERs. They
then claimed that Felipe Manreal informed Juan Maderazo of the intention to offer as
security Lot No. 2985 for the deep sea-fishing loan with the DBP. They also justified their
inability to present to the MERCADERs the TCT over Lot No. 2985 on the fact that at the
time the latter were soliciting the title's delivery, it was still in the hands of the lawyer who
was preparing the Extrajudicial Settlement and Partition of the Estate left by the deceased
Vicenta Manreal. The Manreals then prayed for the dismissal of the complaint for being
utterly groundless. 6
In its answer, the DBP admitted:
(1) the loan of spouses Juan and Juana Maderazo; and
(2) the deep-sea fishing loan of spouses Felipe and Florentina Manreal which was secured
among others, by a first mortgage over Lot No. 2985 evidenced by a TCT already registered
in their names, free from any lien or encumbrance.
It denied any knowledge or information of: (1) any flaw or infirmity in the TCT over Lot No.
2985; (2) any interest in Lot No. 2985 other than and adverse to the spouses Felipe and
Florentina Manreal as registered owners and mortgagors; and (3) the existence of the lease
contract for right of way over a portion of Lot No. 2985 because it was not registered and
that the spouses Gelacio and Vicenta Manreal were not the ones who mortgaged said Lot
No. 2985 to the DBP but their children, the spouses Felipe and Florentina Manreal.
The DBP maintained that the alleged unregistered interests of the MERCADERs did not and
could not bind the DBP per Art. 1648 of the Civil Code 7 and Section 64 of Act 496. 8 It then
prayed for the dismissal of the complaint for being premature and for lack of cause of
action as it never dealt with Gelacio Manreal and there was as yet no foreclosure. Besides,
the DBP was a mortgagee in good faith. 9
In the meantime or on 26 November 1979, Lot No. 2985 was sold, among the other
mortgaged lots, on public auction to the DBP as the highest bidder. 10
During the pre-trial stage, the trial court acknowledged the possibility of a compromise
agreement, gave time to the parties to study their proposals and counterproposals and
ordered the documents pertinent thereto deemed parts of the record of the case. 11 Orders
were further issued "giving the parties more time to continue with their negotiations and

re-setting the hearing of the case." 12 Several communications were thereafter exchanged,
to wit:
(1) a letter dated 24 June 1981 wherein the MERCADERs proposed that Maderazo's
contract of lease for right of way be registered, and respect be accorded to the contract of
lease the MERCADERs executed with the Manreals, or as an alternative allow the
MERCADERs to purchase Lot No. 2985 on installment basis at the price of P6.00 per square
meter; 1
(2) a letter dated 22 July 1982 wherein the DBP through its Manager (Mr. Manuel Roa)
offered the MERCADERs three options by which they could amicably settle subject to the
approval of the Board of Governors of the Bank to wit: 14
a. First Option Sale
P96,200.00 Purchase price
19,200.00 Down payment
77,000.00 Balance payable in 10 years at 15%
interest per annum
1, 242.28 Monthly amortization
b. Second Option Lease-Purchase
P132,598.84 Consideration
1,105.00 Monthly lease-purchase for 10 years
c. Third Option Lease
P14,430.00 Equivalent to 15% annual interest of P96,200
1,202.50 Monthly lease
(3) a letter dated 18 November 1982 whereby the MERCADERs chose option 2 (leasepurchase); 15
(4) a letter dated 23 November 1982 whereby the MERCADERs informed the DBP's
Manager that they were "depositing P3,315.00 with the bank" pursuant to said Manager's
proposal that a three-month advance payment should be deposited while the MERCADERs
await the final decision of the bank on the proposed settlement. 16

The DBP issued an official receipt for the payment of P3,315 as "earnest money, deposit to
purchase lot 2985." 17
With this development, on 9 December 1982, the trial court directed the parties to submit
"their compromise agreement which required the approval of the Board of Governors." 18
The DBP and the MERCADERs thereafter again exchanged a series of correspondences. In
his 13 January 1983 letter to the DBP (through Mr. Ruben Carpio), Bernardo Mercader
requested for a grace period in the payment of the amortization for the lease-purchase
option. 19 In response, the DBP wrote a letter dated 19 January 1983 informing Bernardo
Mercader that it had already "prepared [its] recommendation to the head office, . . . rejected
the request for a grace period but informed [him] to respond soon or visit the bank for a
possible conference." 20Bernardo Mercader replied through a letter dated 5 October 1983
reiterating his accord to the lease-purchase option but suggesting this time that the
amortization be paid on a quarterly basis. 21 In its 29 February 1984 letter, the DBP "noted"
Mercader's suggestion as "counter-proposals or counter-offers which [it find un]acceptable
and made dimmer the realization of [their] mutual desire for an early amicable settlement."
The DBP reasoned that "the original conditions packaged in [its] proposal [were] no longer
applicable" considering that the market value of the property increased. 22
With this, the trial court ordered the termination of the pre-trial and set the case for
hearing in its 18 September 1995 order, thus:
As manifested by the plaintiffs, they have alread[y] agreed with the defendant bank that
they will pay the property at P132, 598 payable in ten (10) years in quarterly basis.
However, the counsel of defendant manifested that it was only a proposal. The plaintiff
spouses requested for a longer period of fifteen (15) years which the bank did not agree.
The only issue[s] to be resolved in this case are as follows:
1. Whether the plaintiff [are] entitled to specific performance of said agreement;
2. Whether the defendant bank can be compelled to recognize the lease contract entered
into between the spouses plaintiff Bernardo Mercader and Gelacio Manreal; and
3. Whether the foreclosure proceedings of the contract between the defendant bank is null
and void.
The pre-trial in this case is already closed and terminated. 2
On 7 November 1985, the MERCADERs filed a Supplemental Pleading insisting the
consummation of the lease-purchase option with the payment of the earnest money. 24 The
DBP filed its Opposition to the Supplemental Pleading. 25

Trial proceeded with the parties presenting evidence tending to establish their respective
allegations. On 29 May 1987, the trial court ordered the Manreals dropped from the case.
The MERCADERs offered no objection.
In its decision of 6 September 1988, the trial court reiterated the three issues ascertained
in the pre-trial order and resolved all of them in favor of the MERCADERs. On the first
issue, the trial court found that the "DBP had unnecessarily and unjustifiably made . . .
[Bernardo] Mercader understand that his second option [lease-purchase] would be more
or less approved, except that the approval will come from Manila." 26 Anent the second
issue, the trial court also believed "quite firmly" that the "DBP could not have escaped
having a foreknowledge of the existence of the prior unrecorded lease" as the "possession
and cultivation of Bernardo Mercader . . . [was] a matter of open, notorious and public
knowledge in the area." In resolving the third issue, the court first acknowledged that it is a
"court of equity and not merely a court of law" and the "DBP is not authorized to keep real
propert[y] longer than ten years or so;" then the court "required [the] DBP to set aside the
area affected by the prior unregistered lease, known to [it], when [it] accepted the
mortgage." 27 It then decreed as follows:
WHEREFORE, finding the preponderance of evidence to be in favor of plaintiffs, judgment
is hereby rendered as follows:
1) ordering the defendant DBP and its successors-in-interest to respect and preserve the
Contracts of Lease between the Manreals and the Mercaders until December 31, 1994;
2) ordering the DBP to exclude from the foreclosure proceedings the rights of the plaintiffs
as covered by the Contract of Lease;
3) requiring the defendant DBP to cause the annotation of the Contracts of Lease of
plaintiffs on TCT No. T-40396 of . . . Lot No. 2985 . . . and amend Entry No. 4980-V-14-D-B,
by excluding the improvements of Mercader as guarantee or collateral for defendant Felipe
Manreal's deep-sea fishing loan;
4) ordering the DBP to execute the deed of sale subject to the approval of the Manila Office
of the DBP as to the mode of payment, there being no agreement thereon;
5) requiring the defendant DBP to pay attorney's fees of P5,000, for making it necessary for
the plaintiffs to litigate, in order to protect their rights to the Lease Contract with the
Manreals and to compel DBP to act on the proposals of Mercader as promised by DBP. 28
On appeal, the Court of Appeals found that the trial court erred in treating the leasepurchase option as a controversial issue considering that it was "outside the parties'
pleadings." But invoking the Supreme Court's decision in Castro v. Court of Appeals 29 in that
"the improvements introduced [into the mortgaged property] are to be considered so
incorporated [in the mortgage] only if so owned by the mortgagor," the Court of Appeals
declared that the improvements introduced on Lot No. 2985 had been improperly included
in the foreclosure sale since they were not owned by the mortgagors. But since the

improvements were already included in the foreclosure sale and the MERCADERs
continued the possession and collection of income from the lot, the Court of Appeals, as
already earlier adverted to, reversed and set aside the appealed judgment. It entered a new
one declaring that the MERCADERs were not entitled to any compensation from the DBP. It
also ordered the MERCADERs to immediately turn over the possession of Lot No. 2985 to
the DBP. 30
In this petition for review, the MERCADERs assert that in issuing the challenged decision,
the Court of Appeals contravened Section 4, Rule 20 and Section 5, Rule 10 of the Rules of
Court by holding that the trial court should not have taken cognizance of the leasepurchase option as a controversial issue since it was not raised in the pleadings. They
maintain that the trial court correctly took cognizance of the lease-purchase option because
it was part and parcel of the pre-trial stages, the determination of which will prevent future
litigation thereon. They also pray that in the event of a favorable judgment, this Court
should refer the case back to the Court of Appeals for a determination of whether the trial
court erred in finding that the lease-purchase option was already consummated.
For its part, the DBP contends that the MERCADERs raise questions of facts which are not
reviewable on appeal and that it had opposed and objected to in and at all stages of the
trial, all attempts by the MERCADERs to introduce evidence on the lease-purchase option.
This Court agrees with the MERCADERs and finds that the Court of Appeals erred in
disregarding as material the lease-purchase option on the ground that it was not raised in
the pleadings. If the Court of Appeals adverts to the lack of reference to the lease-purchase
option in the initiatory pleadings, this can be simply explained by the fact that the trial
court only took cognizance thereof when it became an integral component of the pre-trial
proceedings. That is why the lease-purchase option was included firstly, in the pre-trial
order as one of the issues to be resolved at trial and secondly, in the supplemental pleading
subsequently filed by the MERCADERs on 7 November 1985. 31 As a supplemental pleading,
it served to aver supervening facts which were then not ripe for judicial relief when the
original pleading was filed. As such, it was meant to supply deficiencies in aid of the
original pleading, and not to dispense with the latter. 32 Hence, it was patently erroneous
for the Court of Appeals to pronounce that the lease-purchase option was not raised in the
pleadings. The DBP was even quite aware and knowledgeable of the supplemental pleading
because it filed an opposition thereto. 3
The records however reveal that the trial court did not promptly rule on the motion to
admit the supplemental pleading. And during trial, the trial court also failed to rule on the
prompt objection interposed by the DBP's counsel to the MERCADERs' introduction of
evidence relative to said lease-purchase option. But undisputed is the trial court's eventual
admission in open court of the MERCADERs' supplemental pleading, thus:
ATTY. GARLITOS

Probably, I did not make myself quite clear, Your honor. What I mean is during the pre-trial
stage the parties were encourage to negotiate for a settlement. So they made an offer to
DBP and DBP gave them an option.
COURT
Those three options and chose the second one.
ATTY. GARLITOS
We interposed an objection on this option, Your Honor, because any evidence which will be
presented or which transpired during the pre-trial is objectionable. So we interposed an
objection to prevent the witness from testifying on transactions which were referred to
while the parties were negotiating during the pre-trial stage.
ATTY. MERCADER
I wish to correct counsel. Records will show that there was no objection on what transpired
during the pre-trial. As a matter of fact the pre-trial order is very material to the case.
There is a pre-trial that such an offer and three options made by DBP, and that plaintiff
selected the second option and that he deposited earnest money with the bank.
COURT
In other words there is no supplemental complaint.
ATTY. GARLITOS
It is good that they brought that out because we had an opposition and this is what I am
referring to.
COURT
What is your opposition, the price agreed upon?
ATTY. GARLITOS
We objected to the filing of the supplemental complaint and to all evidence presented in
regard to that supplemental complaint.
COURT
It's too late now for you to make an objection. This supplemental pleading has been
admitted by the court. That has become final.
ATTY. GARLITOS

There is no showing that it has been admitted by the court.

COURT
It has been admitted by the court. 34 (Emphasis supplied)
The records also show that not only did the DBP's counsel began to rigorously crossexamine Bernardo Mercader on the lease-purchase option, he also subjected his witness
Mr. Ruben Carpio, then Chief of the Collection Department, DBP to an intensive direct
examination covering said subject matter. 35 He also offered as evidence the DBP's letter
indicating the three options to the MERCADERs as Exhibit "1" and the lease-purchase
option contained therein as Exhibit "1-A." 36
The DBP is undoubtedly estopped from questioning the trial court's inclusion of the leasepurchase option as a controversial issue. This action of the trial court finds anchor on
Section 4, Rule 20 of the Rules of Court which reads:
Sec. 4. Record of pre-trial results. After the pre-trial the court shall make an order which
recites the action taken at the conference, the amendments allowed to the pleadings, and
the agreements made by the parties as to any of the matters considered. Such order shall
limit the issues for trial to those not disposed of by admissions or agreements of counsel
and when entered controls the subsequent course of the action, unless modified before trial
to prevent manifest injustice.
Indeed, the pre-trial is primarily intended to make certain that all issues necessary to the
disposition of a case are properly raised. The purpose is to obviate the element of surprise,
hence, the parties are expected to disclose at the pre-trial conference all issues of law and
fact which they intend to raise at the trial, except such as may involve privileged or
impeaching matter. 37 In the case at bar, the pre-trial order included as integral to the
complete adjudication of the case the issue of whether the MERCADERs can demand
specific performance from the DBP relative to the lease-purchase option. Thus, the element
of surprise that the provision on pre-trial attempts to preclude was satisfied. The surprise
factor was further eliminated, as already earlier mentioned and merely to reiterate here,
with the DBP's (1) motion to oppose the supplemental pleading, (2) objection to the
introduction of evidence connected thereto, (3) later information from the trial court of its
definitive ruling admitting the supplemental pleading, (4) own introduction of evidence
related thereto, and finally, by its (5) intensive participation in the direct and crossexamination of witnesses whose testimonies included said topic. In any case, the filing and
consequent admission of the supplemental pleading by the trial court validated the issues
embraced in the pre-trial order.
Assuming arguendo that the MERCADERs failed to file the supplemental pleading, evidence
relative to the lease-purchase option may be legitimately admitted by the trial court in
conformity with Section 5, Rule 10 of the Rules of Court which states:

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

raised by the pleadings are tried by 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
so 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 freely when the presentation of the
merits of the action will be subserved thereby and the objecting party fails to satisfy the
court that the admission of such evidence would prejudice him in maintaining his action or
defense upon the merits. The court may grant a continuance to enable the objecting party
to meet such evidence. (emphasis supplied).
This provision envisions two scenarios first, when evidence is introduced on an issue
not alleged in the pleadings and no objection was interjected and second, when evidence is
offered again, on an issue not alleged in the pleadings but this time an objection was
interpolated. We are concerned with the second scenario. In Co Tiamco v. Diaz, the Court
held that "when evidence is offered on a matter not alleged in the pleadings, the court may
admit it even against the objection of the adverse party, where the latter fails to satisfy the
court that the admission of the evidence would prejudice him in maintaining his defense
upon the merits, and the court may grant him a continuance to enable him to meet the new
situation created by the evidence. Of course, the court, before allowing the evidence, as a
matter of formality, should allow an amendment of the pleading, . . . And, furthermore,
where the failure to order an amendment does not appear to have caused surprise or
prejudice to the objecting party, it may be allowed as a harmless error. Well-known is the
rule that departures from procedure may be forgiven where they do not appear to have
impaired the substantial rights of the parties." 38
More recently, in Bank of America v. American Realty Corporation 39 citing Talisay-Silay
Milling Co., Inc. v. Asociacion de Agricultores de Talisay-Silay, Inc., 40 the Court reinforces the
Co Tiamco ruling on the application of Section 5, Rule 10 of the Rules of Court in this wise:
The failure of a party to amend a pleading to conform to the evidence adduced during trial
does not preclude adjudication by the court on the basis of such evidence which may
embody new issues not raised in the pleadings. . . . 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 on the issues
discussed and the assertions of fact proved in the course of the trial. The court may treat
the pleading as if it had been amended to conform to the evidence, although it had not been
actually amended. . . . 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 basic requirements of fair play had been met, as where the
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.
As already enunciated, the DBP was not and would not be prejudiced by the incorporation
of the lease-purchase option as one of the controverted issues. Moreover, it had been
afforded ample opportunity to refute and object to the evidence germane thereto, thus, the
rudiments of fair play had been properly observed.
Since we agree with the MERCADERs' contention that the Court of Appeals contravened
Section 4, Rule 20 and Section 5, Rule 10 of the Rules of Court in promulgating the
questioned decision, we have to grant their prayer to refer the matter back to said court for
a determination of the question of whether the lease-purchase option was already
consummated and for a complete ascertainment of the rights and obligations of the parties.
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED DUE
COURSE and the 5 February 1997 judgment and 13 August 1995 resolution of the Court of
Appeals in CA-GR-CV No. 21846 are hereby SET ASIDE. The case is REFERRED BACK to the
Court of Appeals for a determination of whether the lease-purchase option was
consummated with the end view of ascertaining the rights and obligations of the parties.
SO ORDERED.

G.R. No. 129227. May 30, 2000

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioners, vs. THE HON. COURT
OF APPEALS, and CALVIN & ELSA ARCILLA, respondents.
DECISION
GONZAGA_REYES, J.:
Before us is a Petition for Review on Certiorari of the Decision of the Court of
Appeals1 in CA-G.R. CV No. 45891 entitled CALVIN S. ARCILLA and ELSA B. ARCILLA vs.
BANCO FILIPINO SAVINGS and MORTGAGE BANK, ET. AL. which affirmed the decision
of the Regional Trial Court (RTC), Branch 33, Manila ordering BANCO FILIPINO to pay
CALVIN and ELSA ARCILLA the amount of P126,139.00 with interest thereon at 12%
per annum from the filing of the complaint.
The undisputed facts as found by the Court of Appeals are as follows:

"Elsa Arcilla and her husband, Calvin Arcilla, the Appellees in the present recourse,
secured, on three (3) occasions, loans from the Banco Filipino Savings and Mortgage
Bank, the Appellant in the present recourse, in the total amount of P107,946.00 as
evidenced by "Promissory Note" executed by the Appellees in favor of the Appellant.
To secure the payment of said loans, the Appellees executed "Real Estate Mortgages"
in favor of the Appellants over their parcels of land located in BF-Paraaque, covered
by Transfer Certificate of Title Nos. 444645, 450406, 450407 and 455410 of the
Registry of Deeds of Paraaque (Annexes "B" to "B-2", Amended Complaint). Under
said deeds, the Appellant may increase the rate of interest, on said loans, within the
limits allowed by law, as Appellants Board of Directors may prescribe for its
borrowers. At that time, under the Usury Law, Act 2655, as amended, the maximum
rate of interest for loans secured by real estate mortgages was 12% per annum. On
January 10, 1975, the Appellees and the Appellant executed a "Deed of Consolidation
and Amendment of Real Estate Mortgage" whereby the aforementioned loans of the
Appellees and the "Real Estate Mortgage" executed by them as security for the
payment of said loans were consolidated (pages 33-35, Record). Likewise, under said
deed, the loan of the Appellees from the Appellant was increased to P188,000.00.
The Appellees executed a "Promissory Note", dated January 15, 1975, whereby they
bound and obliged themselves, jointly and severally, to pay the Appellant the
aforesaid amount of P188,000.00 with interest at the rate of 12% per annum, in
nineteen (19) years from date thereof, in stated installments of P2,096.93 a month
(page 32, Records).
On January 2, 1976, the Central Bank of the Philippines issued Central Bank Circular
No. 494, quoted infra, as follows:
x x x
3. The maximum rate of interest, including commissions, premiums, fees and other
charges on loans with maturity of more than seven hundred thirty (730) days, by
banking institutions, including thrift banks, or by financial intermediaries
authorized to engage in quasi-banking functions shall be nineteen percent (19%) per
annum.
x x x
7. Except as provided in this Circular and Circular No. 493, loans or renewals thereof
shall continue to be governed by the Usury Law, as amended. (idem, supra)
In the meantime, the Skyline Builders, Inc., through its President, Appellee Calvin
Arcilla, secured loans from the Bank of the Philippine Islands in the total amount of
P450,000.00. To insure payment of the aforesaid loan, the FGU Insurance
Corporation, issued PG Bond No. 1003 for the amount of P225,000.00 (pages 434436, Records) in favor of the Bank of the Philippine Islands. Skyline Buildings, Inc.,
and the Appellees executed an "Agreement of Counter-Guaranty with Mortgage" in
favor of the FGU Insurance Corporation covering the aforesaid parcels of land to

assure payment of any amount that the insurance company may pay on account of
said loans (pages 429-436, Records). The mortgage was annotated as Entry No.
58009 at the dorsal portion of Appellees titles.
After October 30, 1978, the Appellant prepared and issued a "Statement of Account"
to the Appellees on their loan account to the effect that, as of October 30, 1978, the
balance of their loan account, inclusive of interests, computed at 17% per annum,
amounted to 284,490.75 (page 555, Records). It turned out that the Appellant
unilaterally increased the rate of interest on the loan account of the Appellees from
12% per annum, as covenanted in the "Real Estate Mortgage" and "Deed of
Consolidated and Amended Real Estate Mortgage" to 17% per annum on the
authority of the aforequoted Central Bank Circular.
The Appellees failed to pay their monthly amortizations to Appellant. The latter
forthwith filed, on April 3, 1979, a petition, with the Provincial Sheriff, for the
extrajudicial foreclosure of Appellees "Real Esate Mortgage" in favor of the
Appellant for the amount of P342,798.00 inclusive of the 17% per annum which
purportedly was the totality of Appellees account with the Appellant on their loans.
The Appellant was the purchaser of the property at public auction for the aforesaid
amount of P324,798.00. On May 25, 1979, the Sheriff executed a "Certificate of Sale"
over the aforesaid properties in favor of the Appellant for the aforesaid amount
(pages 37-38, Records).
The Appellant filed a "Petition for a Writ of Possession" with the Regional Trial Court
entitled "Banco Filipino Savings and Mortgage Bank vs. Elsa Arcilla, et al., LRC Case
No. P-7757-P". On February 28, 1980, the Court rendered a Decision granting the
Petition of the Appellant. The Appellees appealed to the Court of Appeals but the
latter Court, on June 29, 1985, promulgated a Decision affirming the Decision of the
Regional Trial Court (pages 190-198, Records).
In the meantime, the FGU Insurance Corporation, Inc., redeemed the aforesaid
properties from the Appellant by paying to the latter the amount of P389,289.41
inclusive of interest computed at 17% per annum. The Appellant and FGU Insurance
Corp., Inc., executed, on May 27, 1980, a "Deed of Redemption" (pages 126-129,
Records).
On September 2, 1985, the Appellees filed a complaint in the Court a quo for the
"Annulment of the Loan Contracts, Foreclose Sale with Prohibition and Injunction,
Etc." entitled "Calvin Arcilla, et al. vs. Banco Filipino Savings and Mortgage Bank, et
al." (pages 1-38, Records).
The Appellees averred, in their complaint, inter alia, that the loan contracts and
mortgages between the Appellees and the Appellant were null and void because: (a)
the interests, charges, etc., were deducted in advance from the face value of the
"Promissory Notes" executed by the Appellees; and (b) the rate of interests charged

by the Appellant were usurious. The Appellees prayed that judgment be rendered in
their favor as follows:
"x x x
WHEREFORE, it is respectfully prayed
a) Pending hearing on the prayer for the issuance of the Writ of Preliminary
Injunction, a restraining order be immediately issued against the defendants or
anyone acting in their behalf from enforcing the writ of possession issued against the
plaintiffs;
b) After notice and hearing, a writ of preliminary injunction be issued against the
defendants, particularly defendants FGU Insurance Corporation and the City Sheriff
of Pasay City, MM, or any of his deputies or anyone acting in their behalf from
enforcing the writ of possession;
c) After trial
1) To make the injunction permanent;
2) Declare the loan contracts null and void;
3) Declare the extrajudicial foreclosure null and void;
4) Ordering the defendants to pay the plaintiffs the sums of P100,000.00 as moral
damages; P50,000.00 as attorney fees; and, costs of suit.
PLAINTIFFS further pray for such other reliefs and remedies just and equitable in the
premises." (pages 88-89, Records)
In its Answer to the Complaint, the Appellant averred that the interests charged by it
on Appellees loan accounts and that the said loan contracts and mortgages were
lawful. The Appellant further averred that the Appellees action had already
prescribed.
In the interim, the Supreme Court promulgated its Decision in the precedent - setting
case of "Banco Filipino Savings and Mortgage Bank vs. Hon. Miguel Navarro, et al.,
152 SCRA 346" where it declared that Central Bank Circular No. 494 was not the
"law" envisaged in the mortgage deeds of borrowers of the Bank; that the escalation
clause incorporated in said deeds giving authority to the Appellant to increase the
rate of interests without the corresponding deescalation clause should not be given
effect because of its one-sidedness in favor of the Appellant; that the aforesaid
Central Bank Circular did not apply to loans secured by real estate mortgages, and
that, therefore, the Appellant cannot rely said Circular as authority for it to
unilaterally increase the rate of interests on loans secured by Real Estate Mortgages.

In the meantime, the FGU Insurance Corp., Inc., filed a "Motion for Substitution" with
the Regional Trial Court, in LRC Case No. Pq-7757-P praying that it be substituted as
the Petitioner in said case (pages 354-356, Records). The Appellees were served with
a copy of said motion and filed their Opposition thereto. However, on November 10,
1987, the Regional Trial Court rendered a Decision granting the motion of FGU
Insurance Company (page 369, Records)
On December 3, 1987, the Appellees filed a Motion, with the Court a quo, for leave to
file an "Amended Complaint" to implead FGU Insurance Corporation as party
defendant (pages 83-129, Records). The Court granted said motion and admitted
Appellees Amended Complaint.
After the requisite pre-trial, the Court a quo issued a Pre-Trial Order which defined,
inter alia, Appellees action against the Appellant, and the latters defenses, to wit:
"x x x
On the part of the defendants Banco Filipino Savings to simplify the case, it seeks to
declare as null and void plaintiffs loan contract with Banco Filipino obtained in May
1974, on the ground that the interest agreed in the contract was usurious. Plaintiffs
also seek to declare as null and void the foreclosure of their mortgage by Banco
Filipino on the ground that the loan with the said mortgagee foreclosure maybe
validly done.
DEFENSES
1. Prescription
2. Laches
3. Estoppel" (page 496, Records)
In the meantime, the Appellees and FGU Insurance Corporation entered into and
forged a "Compromise Agreement." The Court a quo promulgated a Decision, dated
April 3, 1991, based on said "Compromise Agreement." Under the "Compromise
Agreement", the Appellees bound and obliged themselves, jointly and severally, to
pay to FGU Insurance Corporation the amount of P1,964,117.00 in three (3) equal
installments and that:
"x x x
6. Upon faithful compliance by plaintiffs Calvin S. Arcilla and Elsa B. Arcilla with their
Agreement, defendant FGU Insurance Corporation shall renounce in their favor all
its rights, interests and claims to the four (4) parcels of land mentioned in paragraph
No. 4 of this Compromise Agreement, together with all the improvements thereon,
and plaintiffs Calvin S. Arcilla and Elsa B. Arcilla shall be subrogated to all such

rights, interests and claims. In addition, defendant FGU Insurance Corporation shall
execute in favor of plaintiffs Calvin S. Arcilla and Elsa B. Arcilla a deed of cancellation
of the real estate mortgage constituted in its favor on the above-mentioned four (4)
parcels of land, together with all the improvements thereon. All documentary stamps
and expenses for registration of the said deed of cancellation of mortgage shall be for
the account of plaintiffs Calvin S. Arcilla and Elsa B. Arcilla.
7. Subject to the provisions of paragraph No. 4 of this Compromise Agreement, the
execution of this Compromise Agreement shall be without prejudice to the
prosecution of the claims of plaintiffs Calvin S. Arcilla and Elsa B. Arcilla. (pages 543544, Records)
Thereafter, the Appellees and the Appellant agreed, upon the prodding of the Court a
quo, that the only issue to be resolved by the Court a quo was, whether or not the
Appellees were entitled to the refund, under the Decision of the Supreme Court in
"Banco Filipino Savings and Mortgage Bank vs. Hon. Miguel Navarro, et al.," supra. On
November 8, 1991, the Appellees filed a "Motion for Summary Judgment" appending
thereto, inter alia, the Affidavit of Appellee Calvin S. Arcilla and the appendages
thereof (pages 550-555, Records). Appellant filed its Opposition but did not append
any affidavit to said Opposition. On March 26, 1993, the Court a quo promulgated a
Decision, the decretal portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against defendant Banco Filipino ordering defendant Banco Filipino to
pay spouses Calvin S. Arcilla and Elsa B. Arcilla the sum of P126,139.00 with interest
thereon at 12% per annum reckoned from the filing of the complaint.
SO ORDERED. (pages 584-585, Records)"2
Petitioner appealed to the Court of Appeals, which affirmed the decision of the RTC
the dispositive portion of which reads:
"IN THE LIGHT OF ALL THE FOREGOING, the assailed Decision is AFFIRMED.
Appellants appeal is DISMISSED. With costs against the Appellant.
SO ORDERED."3
Their Motion for Reconsideration4 was denied hence this petition where the
petitioner assigns the following errors:
"I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE CAUSE OF
ACTION OF THE PRIVATE RESPONDENTS ACCRUED ON OCTOBER 30, 1978, AND
THEREFORE THE FILING OF THEIR COMPLAINT FOR ANNULMENT OF THEIR LOAN
CONTRACTS WITH THE PETITIONER IN 1985 WAS NOT YET BARRED BY
PRESCRIPTION.

II. THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE
MATERIAL ALLEGATIONS OF THE PRIVATE RESPONDENTS COMPLAINT WERE
SUFFICIENT TO WARRANT THE RELIEFS GRANTED TO THEM BY THE LOWER COURT,
PATICULARLY THE REFUND OF P126,139.00 REPRESENTING ALLEGED EXCESS
INTEREST PAID ON THEIR LOAN.
III. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE
RESPONDENTS WERE ENTITLED TO THE SAID REFUND OF P126,139.00 CLAIMED BY
THEM."5
The petitioner maintains that the complaint filed by herein private respondents was
an action for Annulment of Loan Contracts, foreclosure sale with prohibition and
injunction. It is contended that these causes of action accrued on the date of the
execution of the promissory note and deed of mortgage on January 15, 1975 and not
October 30, 1978 as found by the Court of Appeals. Thus, private respondents cause
of action has already prescribed inasmuch as the case was filed on September 2,
1985 or more than ten years thereafter. Petitioner further contends that private
respondents cannot rely on the ruling in the case of Banco Filipino Savings &
Mortgage Bank vs. Navarro6 considering that they were not parties to said case.
Petitioner also maintains that the order of the lower court, which was affirmed by
the Court of Appeals ordering the petitioner to refund the excess interest paid by
private respondents in the amount of P126,318.00 was without any legal basis since
private respondents never raised the issue of interest nor prayed for any relief with
respect thereto. Moreover, the private respondents never paid said amount to the
petitioner. While the amount was included in the bid price of the bank when it
bought the mortgaged properties during the public auction, said bid price did not
prejudice the private respondents because when the private respondents
repurchased the properties, the amount they paid was different and independent of
the redemption price of the bank. Besides, the agreement between the private
respondents and FGU Insurance Corporation was one of sale and not redemption.
Thus, any amount paid by the private respondents to FGU was voluntarily entered
into by them and was not a consequence of the foreclosure of the mortgage
properties.
Conversely, private respondents allege that their action has not prescribed
considering that prescription begins to run from the day the action may be brought;
the date their right of action accrued. It is their contention that the period of
prescription of their action should commence to run from October 30, 1978 when
the petitioner unilaterally increased the rate of interest on private respondents loan
to 17% per annum. Thus, when private respondents filed their action against the
petitioner on September 2, 1985 or almost eight years thereafter, their action had
not yet prescribed. Moreover, private respondents aver that they are entitled to the
refund inasmuch as the escalation clause incorporated in the loan contracts do not
have a corresponding de-escalation clause and is therefore illegal.
The appeal is unmeritorious.

There are only two issues, which must be resolved in the present appeal. First, has
the action of the private respondents prescribed; and second, are the respondents
entitled to the refund of the alleged interest overpayments.
Petitioners claim that the action of the private respondents has prescribed is bereft
of merit. Under Article 1150 of the Civil Code, the time for prescription of all kinds of
actions, when there is no special provision which ordains otherwise, shall be
counted from the day they may be brought. Thus, the period of prescription of any
cause of action is reckoned only from the date the cause of action accrued.7 And a
cause of action arises when that which should have been done is not done, or that
which should not have been done is done.8 The period should not be made to
retroact to the date of the execution of the contract on January 15, 1975 as claimed
by the petitioner for at that time, there would be no way for the respondents to know
of the violation of their rights.9 The Court of Appeals therefore correctly found that
respondents cause of action accrued on October 30, 1978, the date they received the
statement of account showing the increased rate of interest, for it was only from that
moment that they discovered the petitioners unilateral increase thereof. We quote
with approval the pertinent portions of the Court of Appeals decision as follows:
"It is the legal possibility of bringing the action that determines the starting point for
the computation of the period of prescription (Constancia C. Telentino vs. Court of
Appeals, et al., 162 SCRA 66). In fine, the ten-year prescriptive period is to be
reckoned from the accrual of Appellees right of action, not necessarily on the very
date of the execution of the contracts subject of the action (Naga Telepone Co. Inc. vs.
Court of Appeals, et al., 230 SCRA 351). A partys right of action accrues only when
the confluence of the following elements is established:
"xxx: a) a right in favor of the plaintiff by whatever means and under whatever law it
arises or is created; b) an obligation on the part of defendant to respect such right;
and c) an act or omission on the part of such defendant violative of the right of the
plaintiff (Cole vs. Vda. de Gregorio, 116 SCRA 670 [1982]; Mathay vs. Consolidated
Bank & Trust Co., 58 SCRA 559 [1974]; Vda. de Enriquez vs. Dela Cruz, 54 SCRA 1
[1973]. It is only when the last element occurs or takes place that it can be said in law
that a cause of action has arisen (Cole vs. Vda. De Gregorio, supra)" (Maria U. Espaol
vs. Chairman, etc., et al.,, 137 SCRA 314, page 318)
More, the aggrieved must have either actual or presumptive knowledge of the
violation, by the guilty party of his rights either by an act or omission. The question
that now comes to the fore is when the Appellees became precisely aware of the
unilateral increase, by the Appellant, of the rate of interest on their loan account to
17% per annum. As can be ascertained from the records, the Appellees discovered or
should have discovered, for the first time, the unilateral increase by the Appellant of
the rate of interest to 17% per annum when they received the "Statement of
Account" of the Appellant as of October 30, 1978. Hence, it was only then that the
prescriptive period for the Appellees to institute their action in the Court a quo
commenced. Since the Appellees filed their complaint in the Court a quo on

September 2, 1985, the same was seasonably filed within the ten-year prescriptive
period."10
Anent the second issue as to whether the respondents are entitled to recover the
alleged overpayments of interest, we find that they are despite the absence of any
prayer therefor. This Court has ruled that it is the material allegations of fact in the
complaint, not the legal conclusion made therein or the prayer that determines the
relief to which the plaintiff is entitled.11 It is the allegations of the pleading which
determine the nature of the action and the Court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for.12 Thus, even if the
complaint seeks the declaration of nullity of the contract, the Court of Appeals
correctly ruled that the factual allegations contained therein ultimately seek the
return of the excess interests paid.
The amended complaint13 of herein private respondents specifically allege that the
contracts of loan entered into by them and the petitioner were contrary to and
signed in violation of the Usury Law14 and consequentially pray that said contracts
be declared null and void. The amended complaint reads:
"6. The aforementioned loans granted by defendant Banco Filipino to the plaintiffs as
stated on the face of the promissory note and real estate mortgage (Annexes "B" to
"D", inclusive) were not actually received by the plaintiffs because interests, charges,
etc. were deducted in advance from the face value of the loans not in accordance with
the contracts;
7. Even the loan contracts (Annexes "B" to "D", inclusive) required by defendant
Banco Filipino to be signed by the plaintiffs were contrary to and in violation of the
then Usury Law, as amended;
8. Assuming arguendo that the loan contracts between plaintiffs and defendant
Banco Filipino are valid, the extra-judicial foreclosure of the properties of the
plaintiffs on May 24, 1979 was null and void for having been conducted in clear
violation of the law (Act 3135), namely: a) lack of roper notice to the plaintiffs; b)
lack of proper publication and posting as required by law; c) the alleged sale was
conducted at the place other than that prescribed by law, among others;
9. On May 27, 1990, defendant Banco Filipino purportedly executed in favor of
defendant FGU Insurance Corporation a Deed of Redemption over the foreclosed
properties of the plaintiffs, again, without notice to the latter, as evidenced by the
said Deed of Redemption, copy of which is hereto attached and marked as Annex "F".
10. The Deed of Redemption (Annex "F") is clearly null and void for having been
executed in violation of Rule 39, Rules of Court, and other related provisions of the
Rules of Court."15

The loan contracts with real estate mortgage entered into by and between the
petitioner and respondent stated that the petitioner may increase the interest on
said loans, within the limits allowed by law, as petitioners Board of Directors may
prescribe for its borrowers. At the time the contracts were entered into, said
escalation clause was valid.16 It was only pursuant to P.D. No. 1684 which became
effective March 17, 1980 wherein to be valid, escalation clauses should provide: 1.)
that there can be an increase in interest if increased by law or by the Monetary
Board; and 2.) in order for such stipulation to be valid, it must include a provision for
the reduction of the stipulated interest in the event that the maximum rate of
interest is reduced by law or by the Monetary Board.17
Given the validity of the escalation clause, could the petitioner increase the
stipulated interest pursuant to the Central Bank Circular 494 from 12% to 17%.
We rule that it may not.
The escalation clause in the loan contracts reads as follows:
"xxx g) The rate of interest charged on the obligation secured by this mortgage, as
well as the interest on the amount which may have been advanced by the Mortgagee
in accordance with paragraph (b) and (d) hereof, shall be subject, during the terms
of this contract, to such an increase, within the limits allowed by law, as the Board of
Directors of the Mortgagee may prescribe for its debtors; xxx" (emphasis supplied)18
In Banco Filipino Savings & Mortgage Bank vs. Navarro,19 which involved a similar
escalation clause20, we ruled that Central Bank Circular 494, although it has the force
and effect of law, is not a law and is not the law contemplated by the parties which
authorizes the petitioner to unilaterally raise the interest rate of the
loan.21Consequently, the reliance by the petitioner on Central Bank Circular 494 to
unilaterally raise the interest rates on the loan in question was without any legal
basis.
Petitioners argument that the Banco Filipino case cannot be applied to the present
case since the respondents were not intervenors therein is flawed. Only the
judgment in said case cannot bind the respondents as they were not parties thereto,
however, the doctrine enunciated therein is a judicial decision and forms part of the
legal system of the land.22 It forms a precedent, which must be adhered to under the
doctrine of stare decisis.23 Thus, even if the respondents were not parties to the
above-mentioned case, the doctrine enunciated therein may be applied to the
present case.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 45891 is
AFFIRMED and the instant petition is hereby DENIED.
No pronouncement as to costs.

SO ORDERED.

G.R. No. 146089

December 13, 2001

VIRGINIA GOCHAN, LOUISE GOCHAN, LAPU-LAPU REAL ESTATE CORPORATION,

FELIX GOCHAN AND SONS REALTY CORPORATION, MACTAN REALTY DEVELOPMENT
CORPORATION, petitioners,
vs.
MERCEDES GOCHAN, ALFREDO GOCHAN, ANGELINA GOCHAN-HERNAEZ, MA. MERCED
GOCHAN GOROSPE, CRISPO GOCHAN, JR., and MARLON GOCHAN, respondents.
YNARES-SANTIAGO, J.:
This is a petition for review seeking to set aside the decision of the Court of Appeals dated
September 10, 1999 in CA-G.R. SP No. 49084,1 as well as its Resolution2 dated November
22, 2000, denying the Motion for Reconsideration.
Respondents were stockholders of the Felix Gochan and Sons Realty Corporation and the
Mactan Realty Development Corporation. Sometime in 1996, respondents offered to sell
their shares in the two corporations to the individual petitioners, the heirs of the late
Ambassador Esteban Gochan, for and in consideration of the sum of P200,000,000:00.
Petitioners accepted and paid the said amount to respondents. Accordingly, respondents
issued to petitioners the necessary "Receipts."3 In addition, respondents executed their
respective "Release, Waiver and Quitclaim,"4 wherein .they undertook that they would not
initiate any suit, action or complaint against petitioners for whatever reason or purpose.
In turn, respondents, through Crispo Gochan, Jr., required individual petitioners to execute
a "promissory note,"5undertaking not to divulge the actual consideration they paid for the
shares of stock. For this purpose, Crispo Gochan, Jr. drafted a document entitled
"promissory note" in his own handwriting and had the same signed by Felix Gochan, III,
Louise Gochan and Esteban Gochan, Jr.
Unbeknown to petitioners, Crispo Gochan, Jr. inserted in the "promissory note" a phrase
that says, "Said amount is in partial consideration of the sale."6
On April 3, 1998, respondents filed a complaint against petitioners for specific performance
and damages with the Regional Trial Court of Cebu City, Branch 11, docketed as Civil Case
No. CEB-21854. Respondents alleged that sometime in November 1996, petitioner Louise
Gochan, on behalf of all the petitioners, offered to buy their shares of stock, consisting of
254 shares in the Felix Gochan and Sons Realty Corporation and 1,624 shares of stock in
the Mactan Realty Development Corporation; and that they executed a Provisional
Memorandum of Agreement, wherein they enumerated the following as consideration for
the sale:

1. Pesos: Two Hundred Million Pesos (P200M)

2. Two (2) hectares more or less of the fishpond in Gochan Compound, Mabolo, Lot 4F-2-B
3. Lot 2, Block 9 with an area of 999 square meters in Gochan Compound, Mabolo, Cebu
4. Three Thousand (3,000) square meters of Villas Magallanes in Mactan, Cebu
5. Lot 423 New Gem Building with an area of 605 square meters.7
Accordingly, respondents claimed that they are entitled to the conveyance of the
aforementioned properties, in addition to the amount of P200,000,000.00, which they
acknowledge to have received from petitioners. Further, respondents prayed for moral
damages of P15,000,000.00, exemplary damages of P2,000,000.00, attorney's fees of
P14,000,000.00, and litigation expenses of P2,000,000.00.
Petitioners filed their answer, raising the following affirmative defenses: (a) lack of
jurisdiction by the trial court for non-payment of the correct docket fees; (b)
unenforceability of the obligation to convey real properties due to lack of a written
memorandum thereof, pursuant to the Statute of Frauds; (c) extinguishment of the
obligation by payment; (d) waiver, abandonment and renunciation by respondent of all
their claims against petitioners; and (e) non-joinder of indispensable parties.
On August 7, 1998, petitioners filed with the trial court a motion for a preliminary hearing
on the affirmative defenses. In an Order dated August 11, 1998, the trial court denied the
motion, ruling as follows:
As the grant of said motion lies in the discretion of the court under Section 6 of Rule 16 of
the 1997 Rules of Civil Procedure, this Court in the exercise of its discretion, hereby denies
the said motion because the matters sought to be preliminarily heard do not appear to be
tenable. For one, the statute of frauds does not apply in this case because the contract
which is the subject matter of this case is already an executed contract. The statute of
frauds applies only to executory contracts. According to Dr. Arturo M. Tolentino, a leading
authority in civil law, since the statute of frauds was enacted for the purpose of preventing
frauds, it should not be made the instrument to further them. Thus, where one party has
performed his obligation under a contract, equity would agree that all evidence should be
admitted to prove the alleged agreement (PNB vs. Philippine Vegetable Oil Company, 49
Phil. 897). For another, the contention of the defendants that the claims of the plaintiffs are
already extinguished by full payment thereof does not appear to be indubitable because the
plaintiffs denied under oath the due execution and genuineness of the receipts which are
attached as Annexes 1-A, 1-B and 1-C of defendants' answer. This issue therefore has to be
determined on the basis of preponderance of evidence to be adduced by both parties. Then,
still for another, the contention that the complaint is defective because it allegedly has
failed to implead indispensable parties appears to be wanting in merit because the parties
to the memorandum of agreement adverted to in the complaint are all parties in this case.
Then the matter of payment of docketing and filing fees is not a fatal issue in this case

because the record shows that the plaintiffs had paid at least P165,000.00 plus in the form
of filing and docketing fees. Finally, regarding exerting earnest efforts toward a
compromise by the plaintiffs, the defendants cannot say that there is an absence of an
allegation to this effect in the complaint because paragraph 11 of the complaint precisely
states that "before filing this case, earnest efforts toward a compromise have been made."
Petitioners' motion for reconsideration of the above Order was denied by the trial court on
September 11, 1998.
Petitioners thus filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R.
SP No. 49084. On September 10, 1999, the Court of Appeals rendered the appealed decision
dismissing the petition on the ground that respondent court did not commit grave abuse of
discretion, tantamount to lack or in excess of jurisdiction in denying the motion to hear the
affirmative defenses.8
Again, petitioners filed a motion for reconsideration, but the same was denied by the Court
of Appeals in its assailed Resolution of November 22, 2000.9
Petitioners, thus, filed the instant petition for review anchored on the following grounds:
I.
THE COURT OF APPEALS COMMITTED GRAVE AND PALPABLE ERROR IN FINDING THAT
THE CORRECT DOCKET FEES HAVE BEEN PAID.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN RULING THAT THE PMOA WAS
A PARTIALLY EXECUTED CONTRACT AND HENCE NOT COVERED BY THE STATUTE OF
FRAUDS.
III.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DECIDING THAT THE CLAIMS OF
PRIVATE RESPONDENTS HAVE NOT BEEN EXTINGUISHED BY PAYMENT OR FULL
SETTLEMENT DESPITE THE PRESENCE OF RECEIPTS SIGNED BY THE PRIVATE
RESPONDENTS SHOWING THE CONTRARY.
IV.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN RESOLVING THAT FELIX
GOCHAN III AND ESTEBAN GOCHAN, JR. ARE NOT INDISPENSABLE PARTIES AND
THEREFORE NEED NOT BE IMPLEADED AS PARTIES.10

Respondents filed their Comment,11 arguing, in fine, that petitioners are guilty of forumshopping when they filed two petitions for certiorari with the Court of Appeals; and that
the Court of Appeals did not err in dismissing the petition for certiorari.
The instant petition has merit.
The rule is well-settled that the court acquires jurisdiction over any case only upon the
payment of the prescribed docket fees. In the case of Sun Insurance Office, Ltd. (SIOL) v.
Asuncion,12 this Court 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.
Respondents maintain that they paid the correct docket fees in the amount of P165,000.00
when they filed the complaint with the trial court. Petitioners, on the other hand, contend
that the complaint is in the nature of a real action which affects title to real properties;
hence, respondents should have alleged therein the value of the real properties which shall
be the basis for the assessment of the correct docket fees.
The Court of Appeals found that the complaint was one for specific performance and
incapable of pecuniary estimation. We do not agree.
It is necessary to determine the true nature of the complaint in order to resolve the issue of
whether or not respondents paid the correct amount of docket fees therefor. In this
jurisdiction, the dictum adhered to is that the nature of an action is determined by the
allegations in the body of the pleading or complaint itself, rather than by its title or
heading.13 The caption of the complaint below was denominated as one for "specific
performance and damages." The relief sought, however, is the conveyance or transfer of
real property, or ultimately, the execution of deeds of conveyance in their favor of the real
properties enumerated in the provisional memorandum of agreement. Under these
circumstances, the case below was actually a real action, affecting as it does title to or
possession of real property.
In the case of Hernandez v. Rural Bank of Lucena,14 this Court held that a real action is one
where the plaintiff seeks the recovery of real property or, as indicated in section 2(a) of
Rule 4 (now Section 1, Rule 4 of the 1997 Rules of Civil Procedure), a real action is an
action affecting title to or recovery of possession of real property.
It has also been held that where a complaint is entitled as one for specific performance but
nonetheless prays for the issuance of a deed of sale for a parcel of land, its primary
objective and nature is one to recover the parcel of land itself and, thus, is deemed a real
action. In such a case, the action must be filed in the proper court where the property is
located:
In this Court, the appellant insists that her action is one for specific performance, and,
therefore, personal and transitory in nature.

This very issue was considered and decided by this Court in the case of Manuel B. Ruiz vs.
J.M. Tuason & Co., Inc. et al., L-18692, promulgated 31 January 1963. There the Court, by
unanimous vote of all the Justices, held as follows:
'This contention has no merit. Although appellant's complaint is entitled to be one for
specific performance, yet the fact that he asked that a deed of sale of a parcel of land
situated in Quezon City be issued in his favor and that a transfer certificate of title covering
said parcel of land be issued to him shows that the primary objective and nature of the
action is to recover the parcel of land itself because to execute in favor of appellant the
conveyance requested there is need to make a finding that he is the owner of the land
which in the last analysis resolves itself into an issue of ownership. Hence, the action must
be commenced in the province where the property is situated pursuant to Section 3, Rule 5,
of the Rules of Court, which provides that actions affecting title to or recovery of possession
of real property shall be commenced and tried in the province where the property or any
part thereof lies."15
In the case at bar, therefore, the complaint filed with the trial court was in the nature of a
real action, although ostensibly denominated as one for specific performance.
Consequently, the basis for determining the correct docket fees shall be the assessed value
of the property, or the estimated value thereof as alleged by the claimant. Rule 141, Section
7, of the Rules of Court, as amended by A.M. No. 00-2-01-SC, provides:
Section 7. Clerks of Regional Trial Courts. x x x
(b) xxx

xxx

xxx

In a real action, the assessed value of the property, or if there is none, the estimated value
thereof shall be alleged by the claimant and shall be the basis in computing the fees.
We are not unmindful of our pronouncement in the case of Sun Insurance,16 to the effect
that in case 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 period. However, the liberal interpretation of the rules
relating to the payment of docket fees as applied in the case of Sun Insurance cannot apply
to the instant case as respondents have never demonstrated any willingness to abide by the
rules and to pay the correct docket fees. Instead, respondents have stubbornly insisted that
the case they filed was one for specific performance and damages and that they actually
paid the correct docket fees therefor at the time of the filing of the complaint. Thus, it was
stated in the case of Sun Insurance:17
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,
unlikeManchester, 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.
Respondents accuse petitioners of forum-shopping when they filed two petitions before the
Court of Appeals. Petitioners, on the other hand, contend that there was no forum-shopping
as there was no identity of issues or identity of reliefs sought in the two petitions.
We agree with petitioners that they are not guilty of forum-shopping. The deplorable
practice of forum-shopping is resorted to by litigants who, for the purpose of obtaining the
same relief, resort to two different fora to increase his or her chances of obtaining a
favorable judgment in either one. In the case of Golangco v. Court of Appeals,18 we laid down
the following test to determine whether there is forum-shopping:
Ultimately, what is truly important to consider in determining whether forum-shopping
exists or not is the vexation caused the courts and the parties-litigant by a person who asks
different courts and/or administrative agencies to rule on the same or related causes
and/or 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
issues.
In sum, two different orders were questioned, two distinct causes of action and issues were
raised, and two objectives were sought; thus, forum shopping cannot be said to exist in the
case at bar.
Likewise, we do not find that there is forum-shopping in the case at bar. The first petition,
docketed as CA-G.R. SP. No. 49084, which is now the subject of the instant petition,
involved the propriety of the affirmative defenses relied upon by petitioners in Civil Case
No. CEB-21854. The second petition, docketed as CA-G.R. SP No. 54985, raised the issue of
whether or not public respondent Judge Dicdican was guilty of manifest partiality
warranting his inhibition from further hearing Civil Case No. CEB-21854.
More importantly, the two petitions did not seek the same relief from the Court of Appeals.
In CA-G.R. SP. No. 49084, petitioners prayed, among others, for the annulment of the orders
of the trial court denying their motion for preliminary hearing on the affirmative defenses
in Civil Case No. CEB-21854. No such reliefs are involved in the second petition, where
petitioners merely prayed for the issuance of an order enjoining public respondent Judge
Dicdican from further trying the case and to assign a new judge in his stead.

True, the trial court has the discretion to conduct a preliminary hearing on affirmative
defenses. In the case at bar, however, the trial court committed a grave abuse of its
discretion when it denied the motion for preliminary hearing. As we have discussed above,
some of these defenses, which petitioners invoked as grounds for the dismissal of the
action, appeared to be indubitable, contrary to the pronouncement of the trial court.
Indeed, the abuse of discretion it committed amounted to an evasion of positive duty or
virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of
law,19 which would have warranted the extraordinary writ of certiorari. Hence, the Court of
Appeals erred when it dismissed the petition for certiorari filed by petitioners.
WHEREFORE, in view of the foregoing, the instant petition is GRANTED. This case is
REMANDED to the Regional Trial Court of Cebu City, Branch 11, which is directed to
forthwith conduct the preliminary hearing on the affirmative defenses in Civil Case No.
CEB-21854.
SO ORDERED.
Davide, Jr., C.J.;Kapunan, and Pardo, JJ., concur.

G.R. No. 149576 August 8, 2006

REPUBLIC OF THE PHILIPPINES, represented by the Land Registration
Authority, Petitioner,
vs.
KENRICK DEVELOPMENT CORPORATION, Respondent.
DECISION
CORONA, J.:
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 respondents 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
respondents 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, respondents former counsel. He testified that he prepared respondents
answer and transmitted an unsigned draft to respondents 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 Republics motion. 4 It
found respondents 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 respondents 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 courts 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 anothers
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 partys reaction to a statement or action by another person
when it is reasonable to treat the partys reaction as an admission of something stated or
implied by the other person. 9 By adoptive admission, a third persons 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
(b) hears a statement and later on essentially repeats it; 11
(c) utters an acceptance or builds upon the assertion of another; 12
(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
(e) reads and signs a written statement made by another. 14

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 counsels 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 courts February 19, 1999 resolution. And again in the petition it filed in the Court
of Appeals as well as in the comment15 and memorandum it submitted to this Court.
Evidently, respondent completely adopted Atty. Garlitos statements as its own.
Respondents adoptive admission constituted a judicial admission which was conclusive on
it.
Contrary to respondents 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.
Counsels 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.
Moreover, a signature by agents of a lawyer amounts to signing by unqualified
persons, 18 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 respondents 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 validraison d etre in the orderly administration of justice. To
summarily brush them aside may result in arbitrariness and injustice. 19
The Courts 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 herebyREINSTATED.
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. 162836

July 30, 2009

CEFERINA ARGALLON-JOCSON and RODOLFO TUISING, Petitioners,

vs.
COURT OF APPEALS, HON. BONIFACIO T. ONG, in his capacity as the acting Presiding
Judge of the Regional Trial Court of Roxas, Isabela, Branch 23, MARIA CRISTINA
FERTILIZER CORP., and MARCELO STEEL CORP., Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the Decision2 dated 16 January 2004 and the Resolution
dated 25 March 2004 of the Court of Appeals in CA-G.R. SP No. 79179. The Court of Appeals
affirmed the Order dated 14 April 2003 of the Regional Trial Court of Roxas, Isabela,
Branch 23 (trial court), in Civil Case No. Br. 23-377.

The Facts
On 10 August 1992, petitioner Ceferina Argallon-Jocson (Jocson) filed a complaint for
Reconveyance and Damages against Marcelo Steel Corporation and Maria Cristina Fertilizer
Corporation (MCFC), which were represented by Jose Marcelo as president of both
companies.
On 24 February 1999, the trial court rendered a decision, the dispositive portion of which
reads:
AS A CONSEQUENCE OF ALL THE FOREGOING, judgment is hereby rendered in favor of the
plaintiff [Jocson] and against the defendants [Marcelo Steel Corporation and MCFC]: (1)
Ordering the defendants to pay the plaintiff the balance of P2,004,810.42, with legal
interest from 1976 up to the present; (2) attorneys fees in the amount of P20,000.00; and
(3) to pay the costs.3
Marcelo Steel Corporation and MCFC (private respondents) appealed to the Court of
Appeals, which affirmed the trial courts decision. Private respondents did not appeal the
Court of Appeals decision, which became final and executory. Jocson then filed a Motion for
Issuance of a Writ of Execution. On 9 December 2002, the trial court issued an order for the
issuance of a writ of execution in accordance with the tenor of the decision.
On 20 December 2002, a Writ of Execution4 (writ) was issued to the Sheriff of the Office of
the Clerk of Court of Manila, commanding the Sheriff to implement the writ upon private
respondents in accordance with the tenor of the decision. The writ was indorsed to Sheriffs
Levy Duka, Luis Alina, Andreil Garcia, and Nathaniel Abaya, who levied upon the properties
of Marcelo Steel Corporation in full satisfaction of the judgment debt. The execution sale
was then scheduled on 17 February 2003. On 14 February 2003, Midas International
Development Corporation (Midas Corp.) filed a third-party claim, alleging that some of the
levied properties were previously mortgaged to Midas Corp. The execution sale was
postponed to 21 February 2003. On 20 February 2003, Jocson posted a P36 million
indemnity bond5 so that the levied properties would not be released to claimant Midas
Corp. The Sheriffs then proceeded with the execution sale on 21 February 2003 and sold
the properties of Marcelo Steel Corporation for the full satisfaction of the judgment against
private respondents. A certificate of sale6 was issued to petitioner Rodolfo Tuising
(Tuising), who was the highest bidder at the auction sale for P9.9 million.
On 28 February 2003, Jocson filed with the trial court a Very Urgent Ex-Parte Motion for
Issuance of a Break-Open Order and Petition for Contempt of Court.7 On 3 March 2003,
Marcelo Steel Corporation filed an Extremely Urgent Omnibus Motion,8 praying for the
annulment of the execution sale and for the issuance of an order directing the Sheriffs not
to deliver the properties sold to Tuising pending resolution of Marcelo Steel Corporations
motion. Marcelo Steel Corporation alleged that its obligation was merely joint with MCFC
and that the total price of the properties sold on execution was unconscionably inadequate.
On 14 April 2003, the trial court issued an order, the dispositive portion of which reads:

WHEREFORE, premises considered, the execution sale of the properties of the defendant
Marcelo Steel Corporation, namely: Seven (7) dilapidated warehouses, detachable metal
structural steel with scattered machineries, metal scraps, metal G.I. Pipes, wires and post,
held on February 21, 2003, is hereby declared null and void and the Certificate of Sale
dated February 21, 2003 issued pursuant thereto is hereby set aside and cancelled.
The motion for the issuance of a break-open order is hereby denied for lack of merit and
basis.9
Jocson moved for reconsideration of the trial courts order, claiming that the nature of the
obligation to pay the balance of the purchase price was solidary. Tuising filed a Motion for
Intervention with Leave of Court with Motion for Reconsideration and Entry of
Appearance. On the other hand, Marcelo Steel Corporation filed, on 7 May 2003, a
Manifestation and Motion on Satisfaction of Judgment, depositing with the trial court a
Managers Check in the amount of P4,260,198.11 representing full satisfaction of Marcelo
Steel Corporations obligation to Jocson. On 14 July 2003, the trial court denied Jocsons
motion for reconsideration and Tuisings motion for intervention and reconsideration, and
granted Marcelo Steel Corporations prayer for entry of satisfaction of judgment on its
behalf.10
On 18 August 2003, Jocson filed with the trial court a Notice of Appeal, which she later
withdrew on 4 September 2003, and in lieu thereof, petitioners Jocson and Tuising filed a
Petition for Certiorari with the Court of Appeals.11The Court of Appeals dismissed the
petition for lack of merit. Jocson and Tuising filed a motion for reconsideration,12 which the
Court of Appeals denied on 25 March 2004. Hence, this petition.lavvphil
Meanwhile, on 23 February 2004, Jocson filed with the trial court a Motion for Issuance of
Alias Writ of Execution to implement the decision as against MCFC, stating that in view of
the Court of Appeals decision, there is a need to execute the decision as against the other
defendant MCFC.13
The Trial Courts Ruling
In its Order dated 14 April 2003, the trial court ruled that the liability of Marcelo Steel
Corporation was limited to its proportional share in the entire money judgment.
Considering that the dispositive portion of the Decision dated 24 February 1999 in this
case did not state that the obligation of private respondents was solidary, then their
obligation was merely joint. Citing the case of PH Credit Corporation v. Court of
Appeals,14 the trial court held that "being made to pay for an obligation in its entirety when
ones liability is merely for a portion is a sufficient ground to contest an execution sale. It
would be the height of inequity if we allow judgment obligors to shoulder entire monetary
judgments when their legal liabilities are limited only to their proportionate shares in the
entire obligation."
The Court of Appeals Ruling

The Court of Appeals held that in consonance with Section 1, Rule 65 of the Rules of
Civil Procedure,15certiorari is not a substitute for lost appeal. Moreover, the Court of
Appeals found that the assigned issues were factual issues not proper in a petition
for certiorari, which is limited to the issues of jurisdiction and grave abuse of
discretion.
The Court of Appeals found no grave abuse of discretion on the part of the respondent
judge. On the merits of the case, the Court of Appeals held that the obligation of private
respondents to Jocson was merely joint. The Court of Appeals noted that the trial courts
Decision dated 24 February 1999 was silent as to the nature of the liability. Solidary
obligations are not presumed in the absence of an express determination thereof in the
judgment. When the judgment does not provide that the defendants are liable to pay jointly
and severally a certain amount of money, none of them may be compelled to satisfy in full
said judgment.
The Court of Appeals found that the Sheriffs disregarded the trial courts 24 February 1999
Decision, and deviated from the trial courts Order dated 9 December 2002 and the writ of
execution dated 20 December 2002, which directed them to execute the writ in accordance
with the tenor of the decision.
The Issues
Petitioners contend that:
1. THE HONORABLE COURT OF APPEALS ERRED IN DECIDING THAT PETITIONERS
WITHDRAWAL OF THEIR NOTICE OF APPEAL AND SUBSTITUTING IT BY PETITION FOR
CERTIORARI IS PROCEDURALLY IMPERMISSIBLE.
2. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECIDING THAT THE
RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION WHEN HE DECLARED THE
OBLIGATION OF THE DEFENDANTS IN CIVIL CASE NO. 23-377 AS JOINT AND NOT
SOLIDARY.
3. THE HONORABLE COURT OF APPEALS ERRED IN [NOT] DECIDING THAT THE
RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION IN DENYING THE MOTION FOR
A BREAK-OPEN AND DECLARING THE EXECUTION SALE CONDUCTED ON FEBRUARY 21,
2003 NULL AND VOID AND THE CERTIFICATE OF SALE AWARDED TO PETITIONER
TUISING CANCELLED.
4. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECIDING THAT THE
RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION IN GRANTING THE PRAYER FOR
SATISFACTION OF JUDGMENT DESPITE RECEIPT OF PETITIONER JOCSON OF THE
PROCEEDS OF THE SALE AS EVIDENCED BY THE ACKNOWLEDGMENT RECEIPT.

5. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECIDING THAT THE

RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION IN DENYING THE MOTION FOR
INTERVENTION AND IN NOT CONSIDERING THE SAME AS PRO INTERESSE SUO.16
The Ruling of the Court
We find the petition without merit.
At the outset, the Court notes that the petition supposedly filed by petitioners Jocson and
Tuising was not signed by Jocsons counsel. It was Tuisings counsel who signed in behalf of
Jocsons counsel. Tuisings counsel had no authority to sign the petition in behalf of Jocson.
The records are bereft of any proof that Jocson ever authorized Tuisings counsel to be her
counsel or to act in her behalf. Under Section 3, Rule 7 of the Rules of Civil
Procedure,17 every pleading must be signed by the party or counsel representing him,
otherwise the pleading produces no legal effect.
Furthermore, only Tuising signed the Verification and Certification for Non-Forum
Shopping. Jocson did not sign the Verification and Certification. Section 1, Rule 45 of the
Rules of Civil Procedure requires the petition for review on certiorari to be verified.18 A
pleading required to be verified which lacks proper verification shall be treated as an
unsigned pleading.19 Although Tuising belatedly filed on 24 September 2004 a "Special
Power of Attorney" allegedly signed by Jocson and authorizing Tuising to file the petition
for review and to verify and to certify the petition, no explanation was given by Tuising
why the Special Power of Attorney was belatedly filed four months after the petition for
review was filed on 12 May 2004. The lack of a certification against forum shopping or a
defective certification is generally not curable by its subsequent submission or correction,
unless there is a need to relax the rule under special circumstances or for compelling
reasons.20 We find no compelling reason for a liberal application of the rules especially in
this case where the petitioner who did not sign the verification and certification for nonforum shopping already filed with the trial court a Motion for Issuance of Alias Writ of
Execution. By filing the Motion for Issuance of Alias Writ of Execution, Jocson was in effect
abiding by the Court of Appeals Decision dated 16 January 2004.
In Athena Computers, Inc. v. Reyes,21 the Court held that the appellate court was correct in
dismissing the petition where the verification and certification for non-forum shopping
were signed by only one of the two petitioners. The Court held:
The verification of the petition and certification on non-forum shopping before the Court of
Appeals were signed only by Jimenez. There is no showing that he was authorized to sign
the same by Athena, his co-petitioner.
Section 4, Rule 7 of the Rules states that a pleading is verified by an affidavit that the affiant
has read the pleading and that the allegations therein are true and correct to his knowledge
and belief. Consequently, the verification should have been signed not only by Jimenez but
also by Athenas duly authorized representative.

In Docena v. Lapesura, we ruled that the certificate of non-forum shopping should be

signed by all the petitioners or plaintiffs in a case, and that the signing by only one of them
is insufficient. The attestation on non-forum shopping requires personal knowledge by the
party executing the same, and the lone signing petitioner cannot be presumed to have
personal knowledge of the filing or non-filing by his co-petitioners of any action or claim
the same as similar to the current petition.22
In this case, the flaw is fatal considering that Jocson, the co-petitioner who did not sign the
verification and certification of non-forum shopping and whose counsel did not sign the
petition, was the principal party in the original case. Jocson was the plaintiff in the trial
court who sought reconveyance of her properties while her co-petitioner Tuising was not a
party in the original case but was merely the highest bidder in the execution sale which
was declared void by the trial court.1awphi1
The certification of non-forum shopping is rooted in the principle that a party-litigant
should not be allowed to pursue simultaneous remedies in different fora, such act being
detrimental to an orderly judicial procedure.23 The petition, signed only by Tuisings
counsel, conveniently failed to mention the fact that on 23 February 2004, prior to the filing
of the petition, Jocson already filed with the trial court a Motion for Issuance of Alias Writ of
Executionwhich reads:
MOTION FOR ISSUANCE OF ALIAS WRIT OF EXECUTION
PLAINTIFF, by counsel, respectfully states:
1. The Court of Appeals had ruled finally that the DECISION can be implemented only as
against defendant Marcelo Steel Corporation and the RTC Sheriff of Manila, in levying the
properties of the two defendant corporations, violated the dispositive portion of the
decision because there is no showing that their liability is solidary. (CA-G.R. SP-No. 79179);
2. There is need, therefore, to execute the decision as against the other defendant MARIA
CRISTINA FERTILIZER CORPORATION.
WHEREFORE, premises considered, it is respectfully prayed that an ALIAS WRIT OF
EXECUTION be issued to implement the decision as against defendant MARIA CRISTINA
FERTILIZER CORPORATION.24
Clearly, such an action is incompatible with this petition for review. Even at the appellate
courts level, the Motion for Reconsideration25 supposedly filed by petitioners Jocson and
Tuising on 3 February 2004 was also signed by Tuisings counsel only.26 Jocsons filing of
a Motion for Issuance of Alias Writ of Execution to implement the decision as against MCFC
clearly indicates that she already acceded to the Court of Appeals Decision dated 16
January 2004 and no longer intended to move for its reconsideration, much less appeal to
this Court. Besides, a party should not be allowed to abuse and make a mockery of the
judicial process by pursuing simultaneous and incompatible remedies in different courts.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 16 January 2004 and
the Resolution dated 25 March 2004 of the Court of Appeals in CA-G.R. SP No. 79179.
SO ORDERED.

G.R. No. 157195. April 22, 2005

VICAR INTERNATIONAL CONSTRUCTION, INC., and CARMELITA V. LIM, Petitioners,
vs.
FEB LEASING AND FINANCE CORPORATION (now BPI LEASING CORPORATION), Respondents.
DECISION
PANGANIBAN, J.:
Once more, the Court stresses that procedural rules must be used to promote, not obstruct,
substantial justice. The failure to attach the Resolution authorizing herein individual petitioner to
represent herein corporate petitioner is, under the circumstances, excusable. The immediate
correction of the defect should have been deemed sufficient compliance with the rules.
The Case
Before us is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Rules of Court, seeking to
reverse and set aside two Resolutions2 of the Court of Appeals (CA) dated October 23, 20023 and
February 7, 2003,4 in CA-GR SP No. 73117. The earlier Resolution reads:
"The instant petition for certiorari is hereby DISMISSED for lack of proper verification and
certification against forum shopping as the same was executed by Carmelita V. Lim, one of the
petitioners, without showing any authority from petitioner corporation to sign for and on its
behalf."5
The second assailed Resolution denied petitioners "Omnibus Motion for Reconsideration and for
Admission of the Attached Secretarys Certificate."
The Facts
This controversy originated from a Complaint6 for unjust enrichment and damages, filed in the
Regional Trial Court of Makati by herein petitioner, Vicar International Construction, Inc. (Vicar),
against Respondent FEB Leasing and Finance Corporation (now BPI Leasing Corporation) and the
Far East Bank and Trust Company. In turn, FEB Leasing and Finance Corporation filed a
Complaint7 against Vicar, Carmelita Chaneco Lim and one John Doe, for a sum of money, damages
and replevin.
These Complaints stemmed from loans obtained from FEB by Vicar, a corporation engaged in the
construction business, for the purchase of certain heavy equipment. In obtaining the loans, Deeds of
Absolute Sale with a "lease-back" provision were executed by the parties. In those Deeds, Vicar
appears to have sold to FEB the equipment purchased with the loan proceeds and, at the same time,

leased them back.8 For the total loan ofP30,315,494, Vicar claims to have paid FEB an aggregate
amount of P19,042,908 in monthly amortizations.
Nevertheless, FEB maintains that Vicar still had an outstanding balance of about P22,000,000,
despite the extrajudicial foreclosure of sixty-three (63) subdivision lots. These lots, comprising an
aggregate area of 20,300 square meters in Calamba, Laguna, were used by the corporation as
additional collateral. As a consequence, the auction sale produced P17,000,000 which, Vicar claims,
should have been applied to its loans.
In the course of the second (replevin) case, the trial court issued several Orders pertaining to the
possession/custody of eight (8) units of the subject equipment. In an Order dated August 2, 2002,
the regional trial court (RTC) quashed the property counterbond filed by Vicar and denied the
latters Motion to Dismiss the Complaint, which was grounded on forum shopping. In an Order
dated September 30, 2002, the RTC denied the corporations Motion for Reconsideration and
Motion for Voluntary Inhibition of the trial judge.
On October 3, 2002, Vicar filed a Petition for Certiorari before the Court of Appeals, to stop the
implementation of the Writ of Replevin issued against the subject equipment.
Ruling of the Court of Appeals
The Petition was, however, instantly dismissed by the CA in its herein assailed Resolution dated
October 23, 2002, because the Verification and the Certification against forum shopping had been
executed by Petitioner Carmelita V. Lim without any showing that she had the authority to sign for
and on behalf of petitioner-corporation.
On November 23, 2003, the day after receiving its copy of the Resolution, Vicar filed an "Omnibus
Motion for Reconsideration and for Admission of the Attached Secretarys Certificate."
Nevertheless, the CA denied the Omnibus Motion in this wise:
"The belated filing by the petitioners of the Certification of their Corporate Secretary, to the effect
that petitioner Carmelita Lim has been duly authorized by petitioner corporation to file the subject
petition for certiorari, did not cure the defect of said petition. Absent any compelling reason for
petitioners failure to comply at the first instance with the required certification, we cannot,
therefore, accept their subsequent compliance."9
Hence, this Petition.10
The Issues
Petitioners raise the following issues for our consideration:
"A.
Whether compelling reasons exist which warrant the liberal construction of the Petition
for Certiorari.
"B.
Whether petitioners subsequent submission of the secretarys certificate is a sufficient compliance
with the requirement of the law.
"C.

Whether the policy of the law is to afford a party the fullest opportunity to establish the merits of
his case."11
In short, the principal issue is whether the Court of Appeals erred in summarily dismissing the
Petition forCertiorari.
The Courts Ruling
The present Petition for Review is meritorious.
Main Issue:
Propriety of Summary Dismissal
Petitioners assert that Carmelita V. Lim was duly authorized to execute, for and on behalf of Vicar,
the Verification and Certification against forum shopping. Attached to the Petition and signed by
Petitioner Lim was the Verification/Certification, in which was explicitly stated the authorization
and affirmation, as follows:
"x x x. I am likewise duly authorized to execute this Verification/Certification in behalf of petitioner
Vicar International Construction, Inc. x x x."
This statement was supported by Vicars board of directors, who unanimously approved a
Resolution dated October 2, 2002, which reads thus:
"NOW THEREFORE, BE IT RESOLVED, as it is hereby resolved, that the Corporation be authorized
to file a Petition for Certiorari before the Court of Appeals for the purpose of annulling or setting
aside the Orders dated 2 August 2002 and 30 September 2002 rendered by Branch 150 of the
Regional Trial Court of Makati in connection with Civil Case No. 02-357 entitled FEB Leasing &
Finance Corporation, Plaintiff vs. Vicar International Construction, Inc. et al., Defendants.
"RESOLVED further, that the President/General Manager Carmelita V. Lim is hereby authorized to
execute and sign any and all documents necessary for filing of the Petition for Certiorari, including
the verification and certification against forum shopping."12
Petitioners candidly admit that they inadvertently failed to attach the above Resolution to their CA
Petition. In preparing the Petition, their counsel supposedly worked overnight without sleep. She
wanted to file it immediately to avoid the trial courts quashal of their counterbond and, thus, the
immediate seizure of their equipment -- their only means of livelihood.
Their counsel allegedly believed in good faith that the secretarys Certificate was attached to the
Petition. When they received a copy of the October 23, 2002 CA Resolution on November 11, 2002,
they lost no time in filing the following day their "Omnibus Motion for Reconsideration and for
Admission of the Attached Secretarys Certificate."
Petitioners submit that the foregoing circumstances constitute compelling reasons to justify setting
aside the procedural defect, pursuant to Ramos v. Court of Appeals.13
Further, citing Yap v. Baldado,14 they contend that their posthaste submission of the secretarys
Certificate, albeit after the filing of their Petition, constitutes substantial compliance with the
requirements of the law. Finally, they aver that pursuant to the policy of the law to afford parties

the fullest opportunity to establish the merits of their case, the CA should have given due course to
their Petition.
On the other hand, Respondent FEB asserts that the CAs dismissal of the Petition -- arising from
petitioners failure to attach a duly executed verification and certification against forum shopping -is well within the appellate courts authority, pursuant to Sections 3 and 5 of Rule 46 of the Revised
Rules of Civil Procedure.15 Respondent also claims that petitioners present action before this Court
seeks to correct a perceived erroneous application by the CA of a procedural rule that is not
correctible by certiorari.
Finally, respondent alleges that the instant Petition, being based on the ground of excusable
negligence, is actually a motion for new trial. As such, the Petition must allegedly fail, because
petitioners did not execute and attach an affidavit of merits.
The issue before us is not novel; neither are the factual circumstances that gave rise to it.
In Shipside Incorporated v. Court of Appeals,16 the petitioner had not attached any proof that its
resident manager was authorized to sign the Verification and the non-forum shopping Certification,
as a consequence of which the Petition was dismissed by the Court of Appeals. Subsequent to the
dismissal, however, the petitioner filed a motion for reconsideration, to which was already attached
a Certificate issued by its board secretary who stated that, prior to the filing of the Petition, the
resident manager had been authorized by the board of directors to file the Petition.
Citing several cases17 excusing noncompliance with the requirement of a certificate of non-forum
shopping, the Court held that "with more reason should x x x the instant petition [be allowed,] since
petitioner herein did submit a certification on non-forum shopping, failing only to show proof that
the signatory was authorized to do so." The Court further said that the subsequent submission of
the Secretarys Certificate, attesting that the signatory to the certification was authorized to file the
action on behalf of petitioner, mitigated the oversight.
Similarly, in General Milling Corporation v. NLRC,18 the Court of Appeals dismissed the Petition,
which was not accompanied by any board resolution or certification by the corporate secretary
showing that the person who had signed the Certification of Non-Forum Shopping was duly
authorized to represent the petitioner-corporation in the case. In the Motion for Reconsideration,
however, the petitioner attached a board Resolution stating that the signatory of the Certification
had been duly authorized to do so.
Under those circumstances, the Court held that "there was at least substantial compliance with, and
that there was no attempt to ignore, the prescribed procedural requirements," except that the
petition "was not accompanied by a board resolution or a secretarys certificate that the person
who signed it was duly authorized by petitioner to represent it in the case."19
Also, in BA Savings Bank v. Sia,20 the Court of Appeals denied due course to a Petition
for certiorari filed by BA Savings Bank. The CAs action was grounded on the fact that the
Certification on anti-forum shopping incorporated in the Petition had been signed merely by the
banks counsel, not by a duly authorized representative, as required under Supreme Court Circular
No. 28-91. Subsequently filed by the petitioner was a Motion for Reconsideration, to which was
attached a Certificate issued by the corporate secretary. The Certificate showed that the Resolution
promulgated by the board of directors had authorized the lawyers of petitioner "to represent it in
any action or proceeding before any court, tribunal or agency; and to sign, execute and deliver the

certificate of non-forum shopping," among others. Nevertheless, the Court of Appeals denied the
Motion on the ground that Supreme Court Revised Circular No. 28-91 "requires that it is the
petitioner, not the counsel, who must certify under oath to all of the facts and undertakings
required therein."
The Court again reversed the appellate court and ruled thus:
"Circular 28-91 was prescribed by the Supreme Court to prohibit and penalize the evils of forum
shopping. We see no circumvention of this rationale if the certificate was signed by the
corporations specifically authorized counsel, who had personal knowledge of the matters required
in the Circular. In Bernardo v. NLRC,21 we explained that a literal interpretation of the Circular
should be avoided if doing so would subvert its very rationale. Said the Court:
x x x. Indeed, while the requirement as to certificate of non-forum shopping is mandatory,
nonetheless the requirements must not be interpreted too literally and thus defeat the objective of
preventing the undesirable practice of forum-shopping."22
Guided by the above pronouncements, the Court deems it proper and justifiable to grant the
present Petition. Clearly, petitioners did not deliberately ignore SC Circular 28-91. In fact, a
"Verification/Certification," stating the information required under the Circular, was attached to the
Petition for Certiorari filed before the CA. In that Verification/Certification signed by Petitioner Lim,
she attested as follows:
"1. x x x I am likewise duly authorized to execute this Verification/Certification in behalf of
petitioner Vicar International Construction, Inc.
"2. In my personal capacity and as a duly authorized representative of Vicar International
Construction, Inc., I caused the preparation of the foregoing Petition for Certiorari."
xxxxxxxxx
Petitioners merely missed attaching to their Petition a concrete proof of Lims authority from Vicar
to execute the said Verification/Certification on its behalf. The latter, however, lost no time in
submitting its corporate secretarys Certificate attesting to the fact that, indeed, Petitioner Vicars
board of directors had unanimously approved a Resolution on October 2, 2002, authorizing its
president and general manager, Carmelita V. Lim, to file the Petition and "to execute and sign x x x
the verification and certification against forum shopping."
The Certificate was submitted to the CA on the day right after it had denied the Petition. Such
swiftness of action indicates that the Resolution -- authorizing Petitioner Lim to file the Petition and
execute the Verification and the Certification against forum shopping on behalf of Petitioner Vicar -did exist at the time the Petition was filed. Such fact also lends credence to the assertion of
petitioners that it was only due to inadvertence and oversight that they failed to attach the
Secretarys Certificate to their Petition for Certiorari.
In closing, the Court stresses once more that technical rules of procedure should be used to
promote, not frustrate, justice. While the swift unclogging of court dockets is a laudable objective,
the granting of substantial justice is an even more urgent ideal.23 Rules of procedure are but tools
designed to facilitate, not obstruct, the attainment of justice.

WHEREFORE, the Petition is GRANTED, and the appealed Resolutions

are REVERSED and SET ASIDE. The case is REMANDED to the Court of Appeals, which is directed to
continue the proceedings in CA-GR SP No. 73117 with deliberate speed. No costs.
SO ORDERED.

G.R. No. 135042 September 23, 1999

ROBERN DEVELOPMENT CORPORATION, petitioner,
vs.
JUDGE JESUS V. QUITAIN, Regional Trial Court of Davao City, Br. 15; and NATIONAL POWER
CORPORATION, respondents,

PANGANIBAN, J.:
Expropriation proceedings are governed by revised Rule 67 of the 1997 Rules of Civil Procedure
which took effect on July 1, 1997. Previous doctrines inconsistent with this Rule are deemed
reversed or modified. Specifically, (1) an answer, not a motion to dismiss, is the responsive pleading
to a complaint in eminent domain; (2) the trial court may issue a writ of possession once the
plaintiff deposits an amount equivalent to the assessed value of the property, pursuant to Section 2
of said Rule, without need of a hearing to determine the provisional sum to be deposited; and (3) a
final order of expropriation may not be issued prior to a full hearing and resolution of the
objections and defenses of the property owner.
The Case
Before us is a Petition under Rule 45, challenging the Decision of the Court of
Appeals 1 promulgated February 27, 1998 and its Resolution promulgated July 23, 1998 in CA-GR
SP-46002, which (1) dismissed the action for certiorari and preliminary injunction filed by Robern
Development Corporation ("Robern" for brevity); and (2) effectively affirmed the Orders (dated
August 13, 1997; September 11, 1997; and November 5, 1997) and the Writ of Possession (dated
September 19, 1997), all issued by the Regional Trial Court of Davao City in Civil Case No. 2535697.
The assailed Decision disposed as follows: 2
IN VIEW OF ALL THE FOREGOING, the instant petition is ordered DISMISSED. Costs against the
petitioner.
In its assailed Resolution, the Court of Appeals denied reconsideration in this manner: 3
There being no compelling reason to modify, reverse or reconsider the Decision rendered in the
case dated February 27, 1998[;] the Motion for Reconsideration posted by petitioner on March 23,
1998 isDENIED, it appearing further that the arguments raised therein were already considered
and passed upon in the aforesaid Decision.

The Facts
The following facts are undisputed.
1. Robern is the registered owner of a parcel of land with an area of about 17,746.50 square meters,
which the National Power Corporation ("NPC" for brevity) is seeking to expropriate. The property
forms part of a proposed low-cost housing project in Inawayan, Binugao, Toril, Davao City.
2. On June 6, 1997, NPC filed a Complaint for Eminent Domain against Robern. 4 Instead of filing an
answer, petitioner countered with a Motion to Dismiss, 5 alleging (a) that the Complaint suffered a
jurisdictional defect for not showing that the action bore the approval of the NPC board of directors;
(b) that Nemesio S. Caete, who signed the verification and certification in the Complaint, was not
the president, the general manager or an officer specifically authorized under the NPC charter (RA
6395); (c) that the choice of property to be expropriated was improper, as it had already been
intended for use in a low-cost housing project, a public purpose within the contemplation of law;
and the choice was also arbitrary, as there were similar properties available within the
area.1wphi1.nt
3. Before this Motion could be resolved, NPC filed a Motion for the Issuance of Writ of Possession
based on Presidential Decree No. 42. On July 9, 1997, NPC deposited P6,121.20 at the Philippine
National Bank, Davao Branch, as evidenced by PNB Savings Account No. 385-560728-9. 6
4. In its Order of August 13, 1997, the trial court denied petitioner's Motion to Dismiss in this wise:
This refers to the motion to dismiss. The issues raised are matters that should be dealt with during
the trial proper. Suffice it to say that [NPC] has the privilege as a utility to use the power of eminent
domain.
The motion is denied for lack of merit. The pre-trial conference shall be on August 27, 1997 at 2:30
P.M. 7
5. On September 2, 1997, petitioner filed a Motion for Reconsideration, pointing out that (a) the
issues raised in the Motion to Dismiss could be resolved without trial, as they could be readily
appreciated on the face of the Complaint itself vis--vis the applicable provisions of law on the
matter; and (b) the grounds relied upon for dismissing the Complaint did not require
evidence aliunde.
6. On September 11, 1997, the trial court denied the Motion. as follows:
The . . . motion [of the petitioner] for reconsideration is denied for lack of merit. Finding the . . .
motion [of NPC] to be meritorious[,] let a writ of possession issue. 8
7. On September 22, 1997, petitioner filed a Motion for Reconsideration of the Order of September
11, 1997, arguing among others that Section 15-A of RA 6395 was virtually "amended" when Caete
was allowed to verify and sign the certificate of non-forum shopping in regard to the Complaint for
expropriation filed by NPC.
8. Without awaiting the outcome of the Motion for Reconsideration, NPC filed a Motion to
Implement the Writ of Possession.
9. On September 19, 1997, in spite of petitioner's opposition, the trial court issued a Writ of
Possession as follows:

WHEREAS, the applicant National Power Corporation in the above-titled case has presented to this
Court a petition praying for the issuance of a Writ of Possession of the affected property of the . . .
Robern Development Corporation, described hereinbelow, as follows:
TCT No. Total Area in Area Affected in
Square Meter Square Meter
T-251558
(T-141754) 11,469.00 3,393.00
T-251559
(T-141755) 10,000.00 2,124.00
T-251556
(T-14152) 30,000.00 3,402.00
T-251555 45,000.00 8,827.50

TOTAL 97,371.00 17,746.50 Total
affected area
WHEREAS, on September 11, 1997 the court issued an Order granting the issuance of a Writ of
Possession in favor of the . . . National Power Corporation for the immediate possession and control
of the parcels of land owned by the [petitioner] as aforestated for the construction Mantanao-NewLoon 138 KV Transmission Line Project to be undertaken by the petitioner affecting 17,746.50 sq.
m. of the 97,371.00 sq. meters as shown above.
NOW THEREFORE, you are hereby commanded to place [NPC] in possession and control of the
affected property consisting 17,746.50 [s]quare [m]eters of the total area of 97,371.00 square
meters described above and to eject therefrom all adverse occupants, Robern Development
Corporation and [all other] persons . . . claiming under it. 9
10. On November 5, 1997, before counsel for the petitioner received any order from the trial court
directing the implementation of the Writ of Possession, NPC occupied the disputed property.
11. In a Petition for Certiorari before the Court of Appeals (CA), Robern assailed the Writ on the
following grounds: (a) patent on the face of the complaint were its jurisdictional defect, prematurity
and noncompliance with RA 6395; and (b) the issuance of the Writ of Possession was irregular,
arbitrary and unconstitutional, as the trial court had yet to fix the "appropriate value for purposes
of taking or entering upon the property to be expropriated."
Ruling of the Court of Appeals
The Court of Appeals upheld the trial court on the following grounds.
First, the verification and certification of the Complaint by someone other than the president or the
general manager of NPC was not a fatal jurisdictional defect. It was enough to allege that the

expropriating body had the right of eminent domain. The issues of whether the expropriation was
properly authorized by the board of directors and whether Caete's verification and certification of
the Complaint was likewise authorized were evidentiary and could be ruled upon only after the
reception of evidence.
Second, whether the disputed property could still be expropriated even if it had already been
intended to be used in a low-cost housing project and whether the choice of that lot was arbitrary
and erroneous, given the availability of similar properties in the area, were factual issues that
would entail presentation of evidence by both parties.
Third, the allegation in the Complaint that NPC sought to acquire an easement of right-of-way
through the disputed property did not preclude its expropriation. Section 3-A of the NPC charter
allowed the power company to acquire an easement of right-of-way or even the land itself if the
servitude would injure the land.
Fourth, the issuance of the Writ of Possession was proper in view of NPC's compliance with Section
2, Rule 67 of the 1997 Rules of Civil Procedure, by depositing with the Philippine National Bank an
amount equivalent to the assessed value of the disputed property.
Fifth, certiorari was not the proper remedy, as the Order sustaining the right to expropriate the
property was not final and could still be appealed by the aggrieved party. The availability of appeal
ruled out certiorari.
Hence, this Petition. 10
The Issues
In their Memorandum, 11 petitioner raises the following issues: 12
I WHETHER OR NOT THE QUESTIONED ORDER OF THE RESPONDENT JUDGE DATED SEPTEMBER
11, 1997 DIRECTING THE ISSUANCE OF A WRIT OF POSSESSION IS UNCONSTITUTIONAL, HIGHLY
IRREGULAR, ARBITRARY, AND DESPOTIC.
II WHETHER OR NOT THE COMPLAINT FILED IN THE INSTANT CASE IS DISMISSIBLE ON ITS FACE
FOR LACK OF JURISDICTION, BEING FLAWED WITH PREMATURITY, AND VIOLATIVE OF RA 6395.
III WHETHER OR NOT THE COURT OF APPEALS MADE A FINDING NOT BORNE OUT BY THE
COMPLAINT, THUS IT EXCEEDED ITS JURISDICTION AMOUNTING TO LACK OF JURISDICTION.
IV WHETHER OR NOT THE CHOICE OF THE PROPERTY TO BE EXPROPRIATED IS ARBITRARY.
Simply stated, the petition raises the following issues:
1. Were there valid grounds to dismiss the Complaint?
2. Was the Writ of Possession validly issued, considering that the trial court had not conducted any
hearing on the amount to be deposited?
This Court's Ruling
The Court of Appeals was correct in its rulings, but in the interest of substantial justice, the
petitioner should be given an opportunity to file its answer.

First Issue:
Grounds for Dismissal
Jurisdiction
Petitioner contends that the trial court did not acquire jurisdiction over the case because, first, Atty.
Caete who signed the verification and certification of non-forum shopping was neither the
president nor the general manager of NPC; and second, under Section 15-A of RA 6395, only the
NPC chief legal counsel, under the supervision of the Office of the Solicitor General is authorized to
handle legal matters affecting the government power corporation. On the other hand, NPC argues
that Caete, as its regional legal counsel in Mindanao, is authorized to prepare the Complaint on its
behalf.
We find the disputed verification and certification to be sufficient in form. Verification is intended
to assure that the allegations therein have been prepared in good faith or are true and correct, not
mere speculations. 13 Generally, lack of verification is merely a formal defect that is neither
jurisdictional nor fatal. Its absence does not divest the trial court of jurisdiction. 14 The trial court
may order the correction of the pleading or act on the unverified pleading, if the attending
circumstances are such that strict compliance with the rule may be dispensed with in order to serve
the ends of justice.
The certificate of non-forum shopping directs the "plaintiff or principal party" to attest under oath
that (1) no action or claim involving the same issues have been filed or commenced in any court,
tribunal or quasi-judicial agency and that, to the best of the plaintiff's knowledge, no such other
action or claim is pending; (2) if there is such other pending action or claim, a complete statement
of its present status shall be made; and (3) if it should be learned that the same or a similar action
or claim has been filed or is pending, the plaintiff shall report this fact to the court where the
complaint or initiatory pleading was filed. 15 This rule is rooted in the principle that a party-litigant
shall not be allowed to pursue simultaneous remedies in different forums, as this practice is
detrimental to orderly judicial procedure. 16Administrative Circular No. 04-94, which came before
the 1997 Rules of Court, is deemed mandatory but not jurisdictional, as jurisdiction over the subject
or nature of the action is conferred by law. 17
In this case, the questioned verification stated that Atty. Caete was the acting regional legal
counsel of NPC at the Mindanao Regional Center in Iligan City. He was not merely a retained lawyer,
but an NPC in-house counsel and officer, whose basic function was to prepare legal pleadings and to
represent NPC-Mindanao in legal cases. As regional legal counsel for the Mindanao area, he was the
officer who was in the best position to verify the truthfulness and the correctness of the allegations
in the Complaint for expropriation in Davao City. As internal legal counsel, he was also in the best
position to know and to certify if an action for expropriation had already been filed and pending
with the courts.
Besides, Atty. Caete was not the only signatory to the Complaint; he was joined by Comie P.
Doromal, OIC-assistant general counsel; and Catherine J. Pablo both of the NPC Litigation & Land
and Land Rights Department. They all signed on behalf of the solicitor general in accordance with
the NPC charter. 18 Their signatures prove that the NPC general counsel and the solicitor general
approved the filing of the Complaint for expropriation. Clearly then, the CA did not err in holding
that the Complaint was not dismissible on its face, simply because the person who had signed the

verification and certification of non-forum shopping was not the president or the general manager
of NPC.
Legal Standing and
Condition Precedent
Next, petitioner asserts that NPC had no legal standing to file the expropriation case, because the
Complaint did not allege that its board of directors had authorized its filing. It added that under
Section 6, RA 6395, only the board was vested with the corporate power to sue and be sued.
The National Power Corporation explains that, like other corporate officers and employees whose
functions are defined by the board, Atty. Caete is authorized to file the expropriation case. Even if
he is not the general counsel, he has residual authority to prepare, verify and certify the Complaint
for expropriation.
We rule for the private respondent. Rule 67, Section 1 of the Rules of Court, provides:
Sec. 1. The complaint. The right of eminent domain shall be exercised by the filing of a verified
complaint which shall state with certainty the right and purpose of expropriation, describe the real
or personal property sought to be expropriated, and join as defendants all persons owning or
claiming to own, or occupying, any part thereof or interest therein, showing, so far as practicable,
the separate interest of each defendant. . . . . .
The foregoing Rule does not require that the Complaint be expressly approved by the board of
directors of a corporation. In any event, such authorization is a factual issue that can be threshed
out during the trial. As held by the appellate court, "the issue of whether or not the expropriation
proceedings [were] authorized by the Board of Directors or that those who signed the complaint
[were] authorized representatives are evidentiary in character determinable only in [the] trial
proper."
Prematurity of the Complaint
The same ruling applies to the argument alleging prematurity of the Complaint. Petitioner's
insistence that NPC must secure the approval of the provincial board and the municipal council is
unfounded. Section 3(j), RA 6395, merely requires that the Complaint be filed in the same manner
as an expropriation case of the national, the provincial or the municipal government. At bottom, all
that is needed is compliance with Rule 67 of the Rules of Court and the prevailing jurisprudence on
expropriation.
Defenses and Objections
Petitioner avers that the Complaint should be dismissed, because the subject property was already
committed to be used in a low-cost housing project. Besides, there were other available properties
in the area. Finally, the Complaint allegedly sought only an easement of a right-of-way, not
essentially an expropriation.
We disagree. Petitioner's argument in this case is premised on the old rule. Before the 1997
amendment, Section 3 of Rule 67 allowed a defendant "in lieu of an answer, [to] present in a single
motion to dismiss or for other appropriate relief, all of his objections and defenses to the right of
the plaintiff to take his property . . . ." A motion to dismiss was not governed by Rule 15 which

covered ordinary motions. Such motion was the required responsive pleading that took the place of
an answer and put in issue the plaintiffs right to expropriate the defendant's property. 19 Any
relevant and material fact could be raised as a defense in a condemnation proceeding, such as that
which tended to show that (1) the exercise of the power to condemn was unauthorized, or (2) there
was cause for not taking defendant's property for the purpose alleged in the petition, or (3) the
purpose for the taking was not public in character. 20
This old rule found basis in the constitutional provisions on the exercise of the power of eminent
domain, which were deemed to be for the protection of the individual property owner against the
aggressions of the government.21 Under the old rule, the hearing of the motion and the presentation
of evidence followed.
However, Rule 67 of the 1997 Rules of Civil Procedure no longer requires such extraordinary
motion to dismiss. Instead it provides:
Sec. 3. Defenses and objections. . . . .
If a defendant has any objection to the filing of or the allegations in the complaint, or any objection
or defense to the taking of his property, he shall serve his answer within the time stated in the
summons. The answer shall specifically designate or identify the property in which he claims to
have an interest, state the nature and extent of the interest claimed, and adduce all his objections
and defenses to the taking of his property. . . . . .
In his book on remedial law, Justice Florenz D. Regalado writes that the old Rule was a "bit
confusing as the previous holdings under that former provision also allowed the filing of another
motion to dismiss, as that is understood in Rule 16, to raise additionally the preliminary objections
authorized by that Rule." Further, an answer, which is now required, gives more leeway. First, even
if it still applies the omnibus motion rule, it allows amendments to be made within ten days from its
filing. 22 Second, the failure to file an answer does not produce all the disastrous consequences of
default in ordinary civil actions, because the defendant may still present evidence as to just
compensation. 23
When petitioner filed its Motion to Dismiss, the 1997 Rules of Civil Procedure had already taken
effect. Statutes regulating procedure in the courts are applicable to actions pending and
undetermined at the time those statutes were passed. 24 New court rules apply to proceedings that
take place after the date of their effectivity. 25 On April 8, 1997, the Court en banc issued a
Resolution in Bar Matter No. 803, declaring that the revisions in the Rules of Court were to become
effective on July 1, 1997.
Accordingly, Rule 16, Section 1 of the Rules of Court, does not consider as grounds for a motion to
dismiss the allotment of the disputed land for another public purpose or the petition for a mere
easement of right-of-way in the complaint for expropriation. The grounds for dismissal are
exclusive to those specifically mentioned in Section 1, Rule 16 of the Rules of Court, and an action
can be dismissed only on a ground authorized by this provision. 26
To be exact, the issues raised by the petitioner are affirmative defenses that should be alleged in an
answer, since they require presentation of evidence aliunde. 27 Section 3 of Rule 67 provides that "if
a defendant has any objection to the filing of or the allegations in the complaint, or any objection or
defense to the taking of his property," he should include them in his answer. Naturally, these issues
will have to be fully ventilated in a full-blown trial and hearing. It would be precipitate to dismiss

the Complaint on such grounds as claimed by the petitioner. Dismissal of an action upon a motion to
dismiss constitutes a denial of due process if, from a consideration of the pleadings, it appears that
there are issues that cannot be decided without a trial of the case on the
merits. 28
Inasmuch as the 1997 Rules had just taken effect when this case arose, we believe that in the
interest of substantial justice, the petitioner should be given an opportunity to file its answer to the
Complaint for expropriation in accordance with Section 3, Rule 67 of the 1997 Rules of Civil
Procedure.
Order of Condemnation
The Court will now tackle the validity of the trial court's assailed Order of August 13, 1997, which
Respondent Court affirmed in this wise:
. . . . The denial of Robern's Motion to Dismiss [is tantamount] to a confirmation or a determination
of the authority of NPC to exercise the power of eminent domain and the propriety of its exercise in
the context of the facts involved in the case. Under Section 4 of the present Rule 67, 1997
Rules, supra, an order sustaining the right to expropriate the property is a final one and may be
appealed by any aggrieved party (Municipality of Bian v. Garcia, 180 SCRA 576 [1989]). . . . . . 29
We clarify. Founded on common necessity and interest, eminent domain is the inherent right of the
stare (and of those entities to which the power has been lawfully delegated) to condemn private
property to public use upon payment of just compensation. It may appear to be harsh and
encompassing, but judicial review limits the exercise of eminent domain to the following areas of
concern: (1) the adequacy of the compensation, (2) the necessity of the taking, and (3) the publicuse character of the purpose of the taking. 30
If there are objections and defenses that require the presentation of evidence and the hearing of
arguments, the trial court should not immediately issue an order of expropriation. This is clearly
implied in Section 4 of Rule 67, which mandates that "[i]f the objections to and the defenses against
the right of the plaintiff to expropriate the property are overruled, or when no party appears to
defend as required by this Rule, the court may issue an order of expropriation declaring that the
plaintiff has a lawful right to take the property sought to be expropriated, for the public use or
purpose described in the complaint. . . . ."
The Court of Appeals ruled that there were issues that required presentation of evidence during the
trial proper; namely, whether the expropriation proceeding was authorized by the NPC board of
directors, whether the property to be expropriated was already devoted to public use, and whether
the choice of the property was arbitrary and erroneous in view of the other properties available in
the area. The necessity of the taking and the public character of the purpose of the expropriation
were still in issue and pending resolution by the trial court. To these we add the issue of whether
the "taking" of the disputed property would require only an easement of right-of-way or would
perpetually deprive Robern of its proprietary rights. Therefore, the trial court should not have
issued the assailed Order of Expropriation which foreclosed any further objection to the NPC's right
to expropriate and to the public purpose of the expropriation, leaving the matter of just
compensation as the only remaining substantial issue.

The nullity of the Order was glaring. While the trial court correctly denied the Motion to Dismiss, as
the issues raised by the petitioner should be dealt with during the trial proper, it nonetheless ruled
that NPC had "the privilege as a [public] utility to use the power of eminent domain."
Second Issue
Requisite of a Writ of Possession
Petitioner objects to the issuance of the Writ of Possession for being "highly irregular, arbitrary and
despotic," because the Motion to Dismiss was yet to be resolved. It stresses that there was no
hearing on the correct amount of just compensation for the taking of the disputed property, as
required in Panes v. Visayas State College of Agriculture. 31 We cannot uphold this contention.
There is no prohibition against a procedure whereby immediate possession of the land involved in
expropriation proceedings may be taken, provided always that due provision is made to secure the
prompt adjudication and payment of just compensation to the owners. 32 However, the
requirements for authorizing immediate entry in expropriation proceedings have changed.
To start with, in Manila Railroad Company v. Paredes, 33 the Court held that the railway corporation
had the right to enter and possess the land involved in condemnation proceedings under Section 1,
Act No. 1592, 34 immediately upon the filing of a deposit fixed by order of the court.
The Rules of Court of 1964 35 sanctioned this procedure as follows:
Sec. 2. Entry of plaintiff upon depositing value with National or Provincial Treasurer. Upon the
filing of the complaint or at any time thereafter the plaintiff shall have the right to take or enter upon
the possession of the real or personal property involved if he deposits with the National or Provincial
Treasurer its value, as provisionally and promptly ascertained and fixed by the court having
jurisdiction of the proceedings, to be held by such treasurer subject to the orders and final
disposition of the court. . . . . . (emphasis ours.)
Subsequently, former President Ferdinand E. Marcos signed into law Presidential Decree No. 42
and its companion decrees, which removed the court's discretion in determining the amount of the
provisional value of the land to be expropriated and fixed the provisional deposit at its assessed
value for taxation purposes. Hearings was not required; only notice to the owner of the property
sought to be condemned.1wphi1.nt
On the issue of the immediate possession, PD 42 (Authorizing The Plaintiff In Eminent Domain
Proceedings To Take Possession Of The Property Involved Upon Depositing The Assessed Value,
For Purposes of Taxation) provided:
WHEREAS, the existing procedure for the exercise of the right of eminent domain is not expeditious
enough to enable the plaintiff to take or enter upon the possession of the real property involved as
soon as possible, when needed for public purposes;
xxx xxx xxx
. . . [T]hat, upon filing in the proper court of the complaint in eminent domain proceedings or at
anytime thereafter, and after due notice to the defendant, plaintiff shall have the right to take or
enter upon the possession of the real property involved if he deposits with the Philippine National

Bank, . . . an amount equivalent to the assessed value of the property for purposes of taxation, to be
held by said bank subject to the orders and final disposition of the court.
The provisions of Rule 67 of the Rules of Court and of any other existing law contrary to or
inconsistent herewith are hereby repealed.
Paragraph 3 of PD No. 1224 (Defining The Policy On The Expropriation Of Private Property for
Socialized Housing Upon Payment Of Just Compensation) also authorized immediate takeover of
the property in this manner:
3. Upon the filing of the petition for expropriation and the deposit of the amount of just
compensation as provided for herein, the Government, or its authorized agency or entity, shall
immediately have possession, control and disposition of the real property and the improvements
thereon even pending resolution of the issues that may be raised whether before the Court of First
Instance or the higher courts.
Where the "taking" was for "socialized housing," Section 3, PD 1259 (Amending Paragraphs 1, 2,
And 3 Of PD No. 1224 Further Defining The Policy On The Expropriation Of Private Property For
Socialized Housing Upon Payment Of Just Compensation), amending the above-quoted paragraph,
provided:
Upon the filing of the petition for expropriation and the deposit of the amount of the just
compensation provided for in Section 2 hereof, the Government, or its authorized agency or entity,
shall immediately have possession, control and disposition of the real property and the
improvements thereon even pending resolution of the issues that may be raised whether before the
Court of First Instance, Court of Agrarian Relations or the higher courts.
Similarly, Section 1, PD No. 1313 (Further Amending Paragraph 3 Of Presidential Decree No. 1224
As Amended By Presidential Decree No. 1259, Defining The Policy On The Expropriation Of Private
Property For Socialized Housing Upon Payment Of Just Compensation), amending paragraph 3 of
PD 1224, decreed:
Upon the filing of the petition for expropriation and the deposit in the Philippine National Bank at
its main office or any of its branches of the amount equivalent to ten percent (10%) of the just
compensation provided for in Section 2 of Presidential Decree No. 1259, the government, or its
authorized agency or entity, shall immediately have possession, control and disposition of the real
property and the improvements thereon with the power of demolition, if necessary, even pending
resolution of the issues that may be raised whether before the Court of First Instance, Court of
Agrarian Relations, or the higher Courts.
In this connection, we also quote Section 7 of PD No. 1517 (Proclaiming Urban Land Reform In The
Philippines And Providing For The Implementing Machinery Thereof), which reads:
xxx xxx xxx
Upon the filing of the petition for expropriation and the deposit in the Philippine National Bank at
its main office or any of its branches of the amount equivalent to ten per cent (10%) of the declared
assessment value in 1975, the Government, or its authorized agency or entity shall immediately
have possession, control and disposition of the real property and the improvements thereon with

the power of demolition, if necessary, even pending resolution of the issues that may be raised
whether before the Court of First Instance, Court of Agrarian Relations, or the higher Courts.
Finally, PD 1533 (Establishing A Uniform Basis For Determining Just Compensation And The
Amount Of Deposit For Immediate Possession Of The Property Involved In Eminent Domain
Proceedings) mandated the deposit of only ten percent (10%) of the assessed value of the private
property being sought to be expropriated, after fixing the just compensation for it at a value not
exceeding that declared by the owner or determined by the assessor, whichever is lower. Section 2
thereof reads:
Sec. 2. Upon the filing of the petition for expropriation and the deposit in the Philippine National
Bank at its main office or any of its branches of an amount equivalent to ten per cent (10%) of the
amount of compensation provided in Section 1 hereof, the government or its authorized
instrumentality agency or entity shall be entitled to immediate possession, control and disposition
of the real property and the improvements thereon, including the power of demolition if necessary,
notwithstanding the pendency of the issues before the courts.
Accordingly, in San Diego v. Valdellon, 36 Municipality of Daet v. Court of Appeals, 37 and Haguisan
v. Emilia, 38 the Court reversed itself and ruled that Section 2, Rule 67 of the 1964 Rules, was
repealed by Presidential Decree No. 42. The judicial duty of ascertaining and fixing the provisional
value of the property was done away with, because the hearing on the matter had not been
"expeditious enough to enable the plaintiff to take possession of the property involved as soon as
possible, when needed for public purpose." 39
In Daet, the Court clarified that the provisional value of the land did not necessarily represent the
true and correct one but only tentatively served as the basis for immediate occupancy by the
condemnor. The just compensation for the property continued to be based on its current and fair
market value, not on its assessed value which constituted only a percentage of its current fair
market value.
However, these rulings were abandoned in Export Processing Zone Authority v. Dulay, 40 because
"[t]he method of ascertaining just compensation under the aforecited decrees constitute[d]
impermissible encroachment on judicial prerogatives. It tend[ed] to render this Court inutile in a
matter which under the Constitution [was] reserved to it for final determination." The Court added:
We return to older and more sound precedents. This Court has the duty to formulate guiding and
controlling constitutional principles, precepts, doctrines, or rules. (See Salonga v. Cruz Pano, supra).
The determination of "just compensation" in eminent domain cases is a judicial function. The
executive department or the legislature may make the initial determinations but when a party
claims a violation of the guarantee in the Bill of Rights that private property may not be taken for
public use without just compensation, no statute, decree, or executive order can mandate that its
own determination shall prevail over the court's findings. Much less can the courts be precluded
from looking into the "just-ness" of the decreed compensation.
In Province of Camarines Sur v. Court of Appeals, 41 the Court reaffirmed the unconstitutionality of
the presidential decrees that fixed the just compensation in an expropriation case at the value given
to the condemned property either by the owners or by the assessor, whichever was lower.

More precisely, Panes v. Visayas State College of Agriculture 42 ruled that the judicial determination
of just compensation included the determination of the provisional deposit. In that case, the Court
invalidated the Writ of Possession because of lack of hearing on the provisional deposit, as required
under then Section 2 of Rule 67, pre-1997 Rules. In the light of the declared unconstitutionality of
PD Nos. 76, 1533 and 42, insofar as they sanctioned executive determination of just compensation,
any right to immediate possession of the property must be firmly grounded on valid compliance
with Section 2 of Rule 67, pre-1997 Rules; that is, the value of the subject property, as provisionally
and promptly ascertained and fixed by the court that has jurisdiction over the proceedings, must be
deposited with the national or the provincial treasurer. 43
However, the 1997 Rules of Civil Procedure revised Section 2 of Rule 67 and clearly reverted to
the San Diego,Daet and Haguisan rulings. Section 2 now reads:
Sec. 2. Entry of plaintiff upon depositing value with government depositary. Upon the filing of the
complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the
right to take or enter upon the possession of the real property involved if he deposits with the
authorized government depositary an amount equivalent to the assessed value of the property for
purposes of taxation to be held by such bank subject to the orders of the court. . . . .
xxx xxx xxx
After such deposit is made the court shall order the sheriff or other proper officer to forthwith place
the plaintiff in possession of the property involved and promptly submit a report thereof to the
court with service of copies to the parties. [Emphasis ours.]
In the present case, although the Complaint for expropriation was filed on June 6, 1997, the Motion
for the Issuance of the Writ of Possession was filed on July 28, 1997; thus, the issuance of the Writ is
covered by the 1997 Rules. As earlier stated, procedural rules are given immediate effect and are
applicable to actions pending and undetermined at the time they are passed; new court rules apply
to proceedings that take place after the date of their effectivity. 44 Therefore, Section 2, Rule 67 of
the 1997 Rules of Civil Procedure, is the prevailing and governing law in this case. 45
With the revision of the Rules, the trial court's issuance of the Writ of Possession becomes
ministerial, once the provisional compensation mentioned in the 1997 Rule is deposited. Thus, in
the instant case the trial court did not commit grave abuse of discretion when it granted the NPC's
Motion for the issuance of the Writ, despite the absence of hearing on the amount of the provisional
deposit.
The Court nonetheless hastens to add that PD 1533 is not being revived.
Under Section 2, Rule 67 of the 1997 Rules, the provisional deposit should be in an amount
equivalent to the full assessed value of the property to be condemned, not merely ten percent of it.
Therefore, the provisional deposit of NPC is insufficient. Since it seeks to expropriate portions, not
the whole, of four parcels of land owned by Robern, the provisional deposit should be computed on
the basis of the Tax Declarations of the property: 46
TCT No. Total Area Area Affected Assessed Provisional
in Sq. M. in Sq. M. Value Deposit
T-251558

(T-141754) 11,469.00 3,393.00 P4,250.00 P1,257.32

T-251559
(T-141755) 10,000.00 2,124.00 8,960.00 1,903.10
T-251556
(T-14152) 30,000.00 3,402.00 18,910.00 2,144.39
T-251555 45,000.00 8,827.50 18,450.00 3,619.28

TOTAL 97,371.00 17,746.50 P8,924.09
Hence, the amount of the provisional deposit should be increased in order to conform to the
requirement that it should be equivalent to the assessed value of the property. In the interest of
justice, NPC should in the meantime pay Robern reasonable rental, to be fixed by the trial court in
its final decision, for the use and occupation of the disputed property from the date of entry until
the deposit of the full assessed value of the property, as mandated by Rule 67.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-GR SP-46002 are
AFFIRMED with the following MODIFICATIONS: (1) petitioner is granted a period of ten days from
the finality of this Decision within which to file its answer, in accordance with Rule 67 of the 1997
Rules of Court; (2) NPC shall deposit, also within ten days from the finality if this Decision, the full
amount required under the aforecited Rule; and (3) the trial court shall, in its final decision, fix the
rental for the use and the occupation of the disputed property, from the date of NPC's entry until its
deposit of the full amount required under the 1997 Rules. No costs.1wphi1.nt
SO ORDERED.

G.R. No. 149660

January 20, 2009

MARANAW HOTELS AND RESORT CORP., Petitioner,

vs.
COURT OF APPEALS, SHERYL OABEL AND MANILA RESOURCE DEVELOPMENT
CORP., Respondents.
DECISION
PUNO, C.J.:
Before the Court is a petition for review on certiorari assailing a resolution issued by the Court of
Appeals. The resolution denied the petition for review filed by petitioner Maranaw Hotels and
Resort Corp.
The present proceedings emanate from a complaint for regularization, subsequently converted into
one for illegal dismissal, filed before Labor Arbiter Madjayran H. Ajan by private respondent Sheryl
Oabel.

It appears that private respondent Oabel was initially hired by petitioner as an extra beverage
attendant on April 24, 1995. This lasted until February 7, 1997.1 Respondent worked in Century
Park Hotel, an establishment owned by the petitioner.
On September 16, 1996,2 petitioner contracted with Manila Resource Development
Corporation.3 Subsequently, private respondent Oabel was transferred to MANRED, with the latter
deporting itself as her employer.4 MANRED has intervened at all stages of these proceedings and
has consistently claimed to be the employer of private respondent Oabel. For the duration of her
employment, private respondent Oabel performed the following functions:
Secretary, Public Relations Department: February 10, 1997 - March 6, 1997
Gift Shop Attendant:

April 7, 1997

- April 21, 1997

Waitress:

April 22, 1997

- May 20, 1997

Shop Attendant:

May 21, 1997

- July 30, 19985

On July 20, 1998, private respondent filed before the Labor Arbiter a petition for regularization of
employment against the petitioner. On August 1, 1998, however, private respondent Oabel was
dismissed from employment.6Respondent converted her petition for regularization into a
complaint for illegal dismissal.
Labor Arbiter Madjayran H. Ajan rendered a decision on July 13, 1999, dismissing the complaint
against the petitioner. The decision held:
While complainant alleged that she has been working with the respondent hotel in different
department (sic) of the latter on (sic) various capacities (although not all departments are part and
parcel of the hotels), complainant never disputed the fact that her work with the same were on a
per function basis or on a "need basis" co-terminus with the function she was hired
for.Considering that complainant job (sic) with the respondent hotel was on a per function basis
or on a "need basis", complainant could not even be considered as casual employee or provisional
employee. Respondent hotel consider (sic) complainant, at most, a project employee which does
not ripened (sic) into regular employee (sic).7
Private respondent appealed before the National Labor Relations Commission (NLRC). The NLRC
reversed the ruling of the Labor Arbiter and held that: (1) MANRED is a labor-only contractor, and
(2) private respondent was illegally dismissed.
Of the first holding, the NLRC observed that under the very terms of the service contract, MANRED
shall provide the petitioner not specific jobs or services but personnel and that MANRED had
insufficient capitalization and was not sufficiently equipped to provide specific jobs.8 The NLRC
likewise observed that the activities performed by the private respondent were directly related to
and usually necessary or desirable in the business of the petitioner.9
With respect to the termination of private respondents employment, the NLRC held that it was not
effected for a valid or just cause and was therefore illegal. The dispositive portion of the ruling
reads thus:

WHEREFORE, the decision appealed from is hereby REVERSED. xxxx Respondents Century Park
Hotel and Manila Resource Development Corporation are hereby declared jointly and severally
liable for the following awards in favor of complainant: 1) her full backwages and benefits from
August 1, 1998 up to the date of her actual reinstatement; 2) her salary differentials, share in the
service charges, service incentive leave pay and 13th month pay from July 20, 1995 to July 31, 1998.
SO ORDERED.10
Petitioner subsequently appealed before the Court of Appeals. In a resolution, the appellate court
dismissed the petition on account of the failure of the petitioner to append the board resolution
authorizing the counsel for petitioner to file the petition before the Court of Appeals. The Court of
Appeals held:
After a careful perusal of the records of the case, We resolve to DISMISS the present petition on the
ground of non-compliance with the rule on certification against forum shopping taking into account
that the aforesaid certification was subscribed and verified by the Personnel Director of petitioner
corporation without attaching thereto his authority to do so for and in behalf of petitioner
corporation per board resolution or special power of attorney executed by the latter.11
Petitioner duly filed its motion for reconsideration which was denied by the Court of Appeals in a
resolution dated August 30, 2001.12
In the present petition for review, the petitioner invokes substantial justice as justification for a
reversal of the resolution of the Court of Appeals.13 Petitioner likewise contends that the filing of a
motion for reconsideration with the certificate of non-forum shopping attached constitutes
substantial compliance with the requirement.14
There is no merit to the petition.
Well-settled is the rule that the certificate of non-forum shopping is a mandatory requirement.
Substantial compliance applies only with respect to the contents of the certificate but not as to its
presence in the pleading wherein it is required.
Petitioners contention that the filing of a motion for reconsideration with an appended certificate
of non forum-shopping suffices to cure the defect in the pleading is absolutely specious. It negates
the very purpose for which the certification against forum shopping is required: to inform the Court
of the pendency of any other case which may present similar issues and involve similar parties as
the one before it. The requirement applies to both natural and juridical persons.
Petitioner relies upon this Courts ruling in Digital Microwave Corp. v. Court of Appeals15 to show
that its Personnel Director has been duly authorized to sign pleadings for and in behalf of the
petitioner. Petitioner, however, has taken the ruling in Digital Microwave out of context. The
portion of the ruling in Digital Microwaveupon which petitioner relies was in response to the issue
of impossibility of compliance by juridical persons with the requirements of Circular 28-91.16 The
Courts identification of duly authorized officers or directors as the proper signatories of a
certificate of non forum-shopping was in response to that issue. The ruling does not, however, ipso
facto clothe a corporate officer or director with authority to execute a certificate of non-forum
shopping by virtue of the formers position alone.

Any doubt on the matter has been resolved by the Courts ruling in BPI Leasing Corp. v. Court of
Appeals17where this Court emphasized that the lawyer acting for the corporation must be
specifically authorized to sign pleadings for the corporation.18 Specific authorization, the Court held,
could only come in the form of a board resolution issued by the Board of Directors that specifically
authorizes the counsel to institute the petition and execute the certification, to make his actions
binding on his principal, i.e., the corporation.19
This Court has not wavered in stressing the need for strict adherence to procedural requirements.
The rules of procedure exist to ensure the orderly administration of justice. They are not to be
trifled with lightly.
For this reason alone, the petition must already be dismissed. However, even if this grave
procedural infirmity is set aside, the petition must still fail. In the interest of averting further
litigation arising from the present controversy, and in light of the respective positions asserted by
the parties in the pleadings and other memoranda filed before this Court, the Court now proceeds
to resolve the case on the merits.
Petitioner posits that it has entered into a service agreement with intervenor MANRED. The latter,
in turn, maintains that private respondent Oabel is its employee and subsequently holds itself out
as the employer and offers the reinstatement of private respondent.
Notably, private respondents purported employment with MANRED commenced only in 1996, way
after she was hired by the petitioner as extra beverage attendant on April 24, 1995. There is thus
much credence in the private respondents claim that the service agreement executed between the
petitioner and MANRED is a mere ploy to circumvent the law on employment, in particular that
which pertains on regularization.
In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not
cease with the end of each event or function and that there is an ever present need for individuals
to perform certain tasks necessary in the petitioners business. Thus, although the tasks themselves
may vary, the need for sufficient manpower to carry them out does not. In any event, as borne out
by the findings of the NLRC, the petitioner determines the nature of the tasks to be performed by
the private respondent, in the process exercising control.
This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a
labor-only contractor.20 Concordantly, the real employer of private respondent Oabel is the
petitioner.
It appears further that private respondent has already rendered more than one year of service to
the petitioner, for the period 1995-1998, for which she must already be considered a regular
employee, pursuant to Article 280 of the Labor Code:
Art. 280. Regular and casual employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity
exists. (Emphasis supplied)
IN VIEW WHEREOF, the present petition is DENIED. The resolution of the Court of Appeals dated
June 15, 2001 is affirmed.
Costs against petitioner.
SO ORDERED.

G.R. No. 153785 August 3, 2006

VERONIQUE T. HUIBONHOA, Petitioner,
vs.
ANGEL D. CONCEPCION, and HON. RAYMUNDO Z. ANNANG, in his capacity as Presiding Judge
of the Regional Trial Court of Cabanatuan City, Branch 86, Respondents.
RESOLUTION
TINGA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure
assailing the Decision of the Court of Appeals (CA) in CA-G.R. SP No. 65718 promulgated on March
12, 2002 and its Resolution dated May 27, 2002, denying petitioners motion for reconsideration of
said Decision. The CA Decision denied the petition for certiorari filed by Veronique T. Huibonhoa,
herein petitioner, which assailed the Orders dated July 13, 2001 and July 17, 2001 issued by Judge
Raymundo Annang in his capacity as Acting Executive Judge of the Regional Trial Court (RTC) of
Cabanatuan City.
The instant petition stemmed from a complaint for accounting and damages filed by respondent
Angel D. Concepcion, Sr. against petitioner Veronique T. Huibonhoa. The complaint was filed with
the RTC of Cabanatuan City on July 13, 2001 and prayed for the issuance of a preliminary injunction
and preliminary mandatory injunction to immediately restrain Huibonhoa from performing her job
as manager of Poulex Supermarket, among others. On the same day the complaint was filed, Judge
Annang issued a temporary restraining order (TRO) effective for seventy-two (72) hours. The
pertinent portion of the July 13, 2001 Order reads:
WHEREFORE, premises considered, temporary restraining order is hereby issued effective for
seventy two hours from this order restraining and prohibiting defendant Veronique T. Huibonhoa
from occupying and performing her position as Manager of the Poulex Supermarket and from
suppressing, concealing and falsifying the records; and, further, said defendant is hereby ordered to
submit formal turn-over of all cash and other cash items and all management and accounting
records accruing for the business operation of the [sic] Poulex Supermarket for the period of, from
November, 2000 up to the present. Further, defendant Sphinx Security Agency is hereby ordered to

allow the plaintiff or his authorized representative/s to enter the [sic] Poulex Supermarket as
Director of the CHAS, Inc., among others, until further order from this Court. Likewise, Sphinx
Security Agency is hereby restrained from interfering and/or preventing the implementation of the
orders of Angel D. Concepcion, Sr. in his capacity as Chairman-President of CHAS, Inc. 1
On July 16, 2001, Huibonhoa, along with fellow stockholders of CHAS, Inc., CHAS Enterprise
Corporation and CHAS Realty and Development Corporation, filed an intra-corporate and derivative
suit and complaint for injunction with a prayer for temporary restraining order and/or writ of
preliminary injunction to prevent respondent Concepcion, Sr. and his agents from interfering with
the management and operations of the Poulex Supermarket. The complaint was docketed as Civil
Case No. 4068-AF.
On July 17, 2001, Huibonhoa filed an Urgent Manifestation and Motion Ex Abundante Ad Cautelam,
seeking the issuance of an order certifying the expiration of the TRO. Thus, Judge Annang issued on
the same day an order declaring the expiration of the temporary restraining order but at the same
time directing the continuous closure of the supermarket. The July 17, 2001 Order reads in part:
For being meritorious, it is hereby declared that the seventy-two (72) hour TRO effective for only
seventy-two hours from its issuance has already expired on July 16, 2001 at 5:00 p.m.
Considering the fact that the [sic] Poulex Supermarket had already been padlocked on July 16, 2001
after 5:00 P.M. according to the said motion and manifestation of defendant Veronique T.
Huibonhoa, the same should remain closed in the interest of justice and in order not to create
further confusion. Anyway, this case will be raffled tomorrow, July 18, 2001 at 10:00 A.M. in
accordance with the Rules. 2
On July 18, 2001, respondent Concepcions complaint for accounting and damages, docketed as Civil
Case No. 4065, was raffled to Branch 28 of the RTC-Cabanatuan City, the branch designated to
decide cases formerly cognizable by the Securities and Exchange Commission.
On July 20, 2001, Huibonhoa filed a petition for certiorari with the Court of Appeals, docketed as
CA-G.R. SP No. 65718. The petition sought to annul the July 13 and July 17 Orders of Judge Annang
for having been issued with grave abuse of discretion amounting to lack and/or excess of
jurisdiction. Huibonhoas prayer for the issuance of a temporary restraining order was granted in a
Resolution issued on July 23, 2001. The CA Resolution enjoined respondents from implementing
and/or enforcing the assailed orders of Judge Annang, including but not limited to the prevention of
the breaking of the padlock and reopening of Poulex Supermarket, and interference by respondent
Concepcion and his agents with the operations of the supermarket.
On March 12, 2004, the Court of Appeals dismissed Huibonhoas petition for certiorari assailing the
twin orders of Judge Annang on the grounds of pre-maturity and forum shopping. Huibonhoa
moved for its reconsideration but in the Resolution issued on May 27, 2002, the Court of Appeals
denied her motion.
Hence, Huibonhoa filed the instant petition for review on certiorari imputing the following errors to
the Court of Appeals:
I.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISMISSING THE PETITION ON THE
GROUNDS THAT: (A) PETITIONER FAILED TO MOVE FOR THE DISSOLUTION OF THE TEMPORARY
RESTRAINING ORDER WITH THE TRIAL COURT UNDER SECTION 6, RULE 58 OF THE RULES OF
COURT; AND THAT (B) PETITIONER IS GUILTY OF FORUM SHOPPING, CONSIDERING THAT:
A. SECTION 6, RULE 58 OF THE RULES OF COURT IS NOT APPLICABLE TO THE CASE.
B. THE FILING OF THE COMPLAINT IN CIVIL CASE NO. 4068-AF COULD NOT, AS IT DID NOT,
CONSTITUTE FORUM SHOPPING.
C. THE FILING OF THE PETITION FOR CERTIORARI COULD NOT, AND DID NOT CONSTITUTE
FORUM SHOPPING.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT ISSUING THE WRIT OF CERTIORARI TO
ANNUL THE 13 JULY 2001 AND 17 JULY 2001 ORDERS OF THE TRIAL COURT. 3
After respondent Concepcion and petitioner Huibonhoa filed a Comment and a Reply, respectively,
the Court issued a Resolution on September 28, 2005, directing the former to show cause why the
instant petition should not be dismissed for having become moot and academic. The resolution of
the petition is ultimately hinged on the propriety of the issuance of the 72-hour restraining order,
which should have expired ipso jure on the twentieth day, a judicial declaration to that effect not
being necessary. Thus, the filing of the instant petition almost a year after the issuance of the TRO
would be unnecessary.
Huibonhoa submitted a Compliance with Motion to Clarify dated October 25, 2005, conveying the
following: (1) Huibonhoa had proposed a settlement for the parties to dismiss their respective
claims against each other; (2) upon a Joint Motion to Dismiss by both petitioner Huibonhoa and
respondent Concepcion, the trial court issued an order dismissing Civil Case No. 4065, the
complaint for accounting and damages filed by respondent Concepcion; (3) notwithstanding the
dismissal of the pending cases, the parties did not agree to cause the dismissal of the instant
petition; (4) petitioner Huibonhoa is still seeking the reversal of the CA Decision insofar as it ruled
that she was guilty of forum shopping and a clarification on whether her counsel will be exposed to
administrative liability should the instant petition be dismissed. 4
In dismissing the petition for certiorari, the Court of Appeals found petitioner Huibonhoa guilty of
forum shopping when she filed Civil Case No. 4068-AF with the trial court and, thereafter, a petition
for certiorari, docketed as CA-G.R. SP No. 65718, with the Court of Appeals. The appellate court
believed that the two actions had the same object of nullifying the TRO issued by Judge Annang in
Civil Case No. 4065. Petitioner Huibonhoa urges the Court to evaluate the Court of Appeals finding
that she engaged in forum shopping, especially that the appellate court characterized said act as
"deliberate." She stresses that said finding and the accompanying characterization have exposed
her and her counsel to sanctions. 5
In her defense, Huibonhoa insists that Civil Case No. 4068-AF was filed not for the purpose of
defeating the TRO issued by Judge Annang on July 13, 2001 but on account of the acts of
disturbance and attempted forcible take-over by respondent Concepcion committed on July 6,7,12
and 13, 2001. She also asserts that Civil Case No. 4068-AF, while filed on July 16, 2001, was signed
and verified on July 13, 2001 or before a copy of the July 13, 2001 TRO was served on her counsel.

Furthermore, Huibonhoa contends that in contrast, the petition for certiorari was filed with the
Court of Appeals to enjoin or prohibit acts pursuant to the implementation of the July 13 and 17
Orders of Judge Annang, although the TROs separately prayed for in the complaint for injunction
and in the petition for certiorari effectively sought to address the interference in the operations of
the supermarket by respondent Concepcion.
There is forum shopping when, as a result of an adverse opinion in one forum, a party seeks a
favorable opinion, other than by appeal or certiorari in another. There can also be forum shopping
when a party institutes two or more suits in different courts, either simultaneously or successively,
in order to ask the courts to rule on the same or related causes and/or to grant the same or
substantially the same reliefs on the supposition that one or the other court would make a
favorable disposition or increase a partys chances of obtaining a favorable decision or action. 6
The rationale against forum shopping is that a party should not be allowed to pursue simultaneous
remedies in two different fora. Filing multiple petitions or complaints constitutes abuse of court
processes, which tends to degrade the administration of justice, wreaks havoc upon orderly judicial
procedure, and adds to the congestion of the heavily burdened dockets of the courts. Thus, the rule
proscribing forum shopping seeks to promote candor and transparency among lawyers and their
clients in the pursuit of their cases before the courts to promote the orderly administration of
justice, prevent undue inconvenience upon the other party, and save the precious time of the
courts. It also aims to prevent the embarrassing situation of two or more courts or agencies
rendering conflicting resolutions or decisions upon the same issue. 7
To determine whether a party violated the rule against forum shopping, the most important
question to ask is whether the elements of litis pendentia are present or whether a final judgment in
one case will result to res judicata in another. Otherwise stated, to determine forum shopping, the
test is to see whether in the two or more cases pending, there is identity of parties, rights or causes
of action, and reliefs sought. 8
A plain reading of the allegations in the complaint in Civil Case No. 4068-AF and those in the
petition for certiorari filed with the Court of Appeals would preclude the Court from affirming the
Court of Appeals finding that Huibonhoa had engaged in forum shopping. Not all the elements
of litis pendentia concur. There is no identity of parties, rights or causes of action between Civil Case
No. 4068-AF and the petition for certiorari. Civil Case No. 4068-AF is a derivative suit and complaint
for injunction instituted by the stockholders of the aforementioned corporations while the petition
for certiorari was instituted by petitioner in her capacity as manager of Poulex Supermarket. The
complaint in Civil Case No. 4068-AF alleges different causes of action, including those relating to
interference by respondent Concepcion in the operations of the supermarket and causing damages
to the corporations and the stockholders arising from such unlawful interference. The petition for
certiorari aims to nullify the two orders of Judge Annang on the ground that they were issued with
grave abuse of discretion since only the designated special commercial court has jurisdiction to
hear and decide intra-corporate controversies. A resolution on the merits of the petition for
certiorari would necessarily have to discuss the authority of respondent Judge Annang to take
cognizance of the case, which was allegedly an intra-corporate matter, and the issuance of the
mandatory injunction, which was allegedly not sanctioned by any rule. These are the main issues
raised in the petition for certiorari but are not raised as issues in Civil Case No. 4068-F.

The reliefs sought in the two actions are also different. In Civil Case No. 4068-F, aside from the main
action for a permanent injunction, complainants therein also claimed damages. In the petition for
certiorari, Huibonhoa sought the prevention of the implementation of the assailed orders of Judge
Annang. The only common thread
between the two actions is with respect to the TRO sought to prevent respondent Concepcion from
interfering with the operations of the supermarket, but said relief is only incidental and does not
constitute the main cause of action in both cases.
All the foregoing points favorable to petitioners cause notwithstanding, the Court cannot take
favorable action on her petition. In the light of the supervening events, particularly the dismissal of
Civil Case No. 4065, the instant petition has clearly become moot and academic and, therefore,
deserves to be dismissed. With the termination of the case wherein the assailed orders were issued,
it is no longer necessary for this Court to resolve whether the Court of Appeals had correctly upheld
said orders. In addition, one of said orders directed the issuance of a TRO, which, by sheer force of
law, should have expired and did expire after 72 hours, without need of a judicial declaration to that
effect.
Likewise, with the settlement reached by the parties which culminated in the dismissal of the cases
filed by them against each other, petitioner and her counsel have been liberated from any risk of
sanction for their supposed forum shopping.
Courts of justice constituted to pass upon substantial rights will not consider questions where no
actual interests are involved. Thus, the well-settled rule that courts will not determine a moot
question.
Where the issues have become moot and academic, there ceases to be any justiciable controversy,
thus rendering the resolution of the same of no practical value. Courts will decline jurisdiction over
moot cases because there is no substantial relief to which petitioner will be entitled and which will
anyway be negated by the dismissal of the petition. This Court will therefore abstain from
expressing its opinion in a case where no legal relief is needed or called for. 9
WHEREFORE, the instant petition for review on certiorari is DENIED for being moot and academic.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 149011

June 28, 2005

SAN MIGUEL CORPORATION, petitioner

vs.
PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO
D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D.
BALATERIA, JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E.
BEATINGO, SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C.
BOOC, ENRIQUE CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD, RENANTE S.
CAHINOD, RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAETE, JUNNY CASTEL,

JUDY S. CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ,
JOHN D. DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A.
DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO,
LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA, ROMMEL
ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ,
ROBERTLY Y. HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN T. INVENTOR,
PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVIN LAS POBRES,
ALBERT LAS POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO
E. MARTIL, HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM
P. NAVARRO, WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C.
PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY PALANOG, BERNIE O. PILLO, ALBERTO O.
PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR
SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE
SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE,
CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO
TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C.
VIYO and JOSE JOFER C. VIYO and the COURT OF APPEALS, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas
Area Manager for Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-Purpose
Cooperative (Sunflower), represented by the Chairman of its Board of Directors Roy G. Asong,
entered into a one-year Contract of Services1 commencing on January 1, 1993, to be renewed on a
month to month basis until terminated by either party. The pertinent provisions of the contract
read:
1. The cooperative agrees and undertakes to perform and/or provide for the company, on a nonexclusive basis for a period of one year the following services for the Bacolod Shrimp Processing
Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage2
2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative
shall employ the necessary personnel and provide adequate equipment, materials, tools and
apparatus, to efficiently, fully and speedily accomplish the work and services undertaken by the
cooperative. xxx
3. In consideration of the above undertaking the company expressly agrees to pay the cooperative
the following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred
Pesos Only (P19,500.00)

B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per person/activity

whichever is higher, with provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal.
This will be pre-set every harvest based on harvest plan approved by the Senior Buyer.
C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.
One-half of the payment for all services rendered shall be payable on the fifteenth and the other
half, on the end of each month. The cooperative shall pay taxes, fees, dues and other impositions
that shall become due as a result of this contract.
The cooperative shall have the entire charge, control and supervision of the work and
services herein agreed upon. xxx
4. There is no employer-employee relationship between the company and the cooperative, or the
cooperative and any of its members, or the company and any members of the cooperative. The
cooperative is an association of self-employed members, an independent contractor, and an
entrepreneur. It is subject to the control and direction of the company only as to the result to be
accomplished by the work or services herein specified, and not as to the work herein contracted.
The cooperative and its members recognize that it is taking a business risk in accepting a fixed
service fee to provide the services contracted for and its realization of profit or loss from its
undertaking, in relation to all its other undertakings, will depend on how efficiently it deploys and
fields its members and how they perform the work and manage its operations.
5. The cooperative shall, whenever possible, maintain and keep under its control the premises
where the work under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its
member-workers or otherwise in the direction and control thereof. The determination of the
wages, salaries and compensation of the member-workers of the cooperative shall be within its full
control. It is further understood that the cooperative is an independent contractor, and as such, the
cooperative agrees to comply with all the requirements of all pertinent laws and ordinances, rules
and regulations. Although it is understood and agreed between the parties hereto that the
cooperative, in the performance of its obligations, is subject to the control or direction of the
company merely as a (sic) result to be accomplished by the work or services herein specified, and
not as to the means and methods of accomplishing such result, the cooperative hereby warrants
that it will perform such work or services in such manner as will be consistent with the
achievement of the result herein contracted for.
xxx
8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all
benefits, premiums and protection in accordance with the provisions of the labor code, cooperative
code and other applicable laws and decrees and the rules and regulations promulgated by
competent authorities, assuming all responsibility therefor.

The cooperative further undertakes to submit to the company within the first ten (10) days of every
month, a statement made, signed and sworn to by its duly authorized representative before a
notary public or other officer authorized by law to administer oaths, to the effect that the
cooperative has paid all wages or salaries due to its employees or personnel for services rendered
by them during the month immediately preceding, including overtime, if any, and that such
payments were all in accordance with the requirements of law.
xxx
12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a
period of one (1) year commencing on January 1, 1993. Thereafter, this Contract will be deemed
renewed on a month-to-month basis until terminated by either party by sending a written notice to
the other at least thirty (30) days prior to the intended date of termination.
xxx3 (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at
SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed
by the parties every month after its expiration on January 1, 1994 and private respondents
continued to perform their tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch
No. VI, Bacolod City, praying to be declared as regular employees of SMC, with claims for recovery
of all benefits and privileges enjoyed by SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended Complaint4 to include
illegal dismissal as additional cause of action following SMCs closure of its Bacolod Shrimp
Processing Plant on September 15, 19955 which resulted in the termination of their services.
SMC filed a Motion for Leave to File Attached Third Party Complaint6 dated November 27, 1995 to
implead Sunflower as Third Party Defendant which was, by Order7 of December 11, 1995, granted
by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the
Department of Labor and Employment (DOLE) a Notice of Closure8 of its aquaculture operations
effective on even date, citing serious business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents complaint
for lack of merit, ratiocinating as follows:
We sustain the stand of the respondent SMC that it could properly exercise its management
prerogative to contract out the preparation and processing aspects of its aquaculture operations.
Judicial notice has already been taken regarding the general practice adopted in government and
private institutions and industries of hiring independent contractors to perform special services.
xxx
xxx
Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under
specific conditions and we do not see how this activity could not be legally undertaken by an
independent service cooperative like the third-party respondent herein.

There is no basis to the demand for regularization simply on the theory that complainants
performed activities which are necessary and desirable in the business of respondent. It has been
held that the definition of regular employees as those who perform activities which are necessary
and desirable for the business of the employer is not always determinative because any agreement
may provide for one (1) party to render services for and in behalf of another for a consideration
even without being hired as an employee.
The charge of the complainants that third-party respondent is a mere labor-only contractor is a
sweeping generalization and completely unsubstantiated. xxx In the absence of clear and
convincing evidence showing that third-party respondent acted merely as a labor only contractor,
we are firmly convinced of the legitimacy and the integrity of its service contract with respondent
SMC.
In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision
purely dictated by economic factors which was (sic) mainly serious business losses. The law
recognizes the right of the employer to close his business or cease his operations for bonafide
reasons, as much as it recognizes the right of the employer to terminate the employment of any
employee due to closure or cessation of business operations, unless the closing is for the purpose of
circumventing the provisions of the law on security of tenure. The decision of respondent SMC to
close its Bacolod Shrimp Processing Plant, due to serious business losses which has (sic) clearly
been established, is a management prerogative which could hardly be interfered with.
xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who
were accordingly terminated following the legal requisites prescribed by law. The closure, however,
in so far as the complainants are concerned, resulted in the termination of SMCs service contract
with their cooperative xxx9(Underscoring supplied)
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding
that third party respondent Sunflower was an independent contractor in light of its observation
that "[i]n all the activities of private respondents, they were under the actual direction, control and
supervision of third party respondent Sunflower, as well as the payment of wages, and power of
dismissal."10
Private respondents Motion for Reconsideration11 having been denied by the NLRC for lack of
merit by Resolution of September 10, 1999, they filed a petition for certiorari12 before the Court of
Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss13 private respondents petition for non-compliance
with the Rules on Civil Procedure and failure to show grave abuse of discretion on the part of the
NLRC.
SMC subsequently filed its Comment14 to the petition on March 30, 2000.
By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly
found for private respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1)
REVERSING and SETTING ASIDE both the 29 December 1998 decision and 10 September 1999

resolution of the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC
Case No. V-0361-97 as well as the 23 September 1997 decision of the labor arbiter in RAB Case No.
06-07-10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT petitioners: (a)
separation pay in accordance with the computation given to the regular SMC employees working at
its Bacolod Shrimp Processing Plant with full backwages, inclusive of allowances and other benefits
or their monetary equivalent, from 11 September 1995, the time their actual compensation was
withheld from them, up to the time of the finality of this decision; (b) differentials pays (sic)
effective as of and from the time petitioners acquired regular employment status pursuant to the
disquisition mentioned above, and all such other and further benefits as provided by applicable
collective bargaining agreement(s) or other relations, or by law, beginning such time up to their
termination from employment on 11 September 1995; and ORDERING private respondent SMC to
PAY unto the petitioners attorneys fees equivalent to ten (10%) percent of the total award.
No pronouncement as to costs.
SO ORDERED.15 (Underscoring supplied)
Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court
reasoned:
Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a
clear intent to abstain from establishing an employer-employee relationship between SMC and
[Sunflower] or the latters members, the extent to which the parties successfully realized this intent
in the light of the applicable law is the controlling factor in determining the real and actual
relationship between or among the parties.
xxx
With respect to the power to control petitioners conduct, it appears that petitioners were under
the direct control and supervision of SMC supervisors both as to the manner they performed their
functions and as to the end results thereof. It was only after petitioners lodged a complaint to have
their status declared as regular employees of SMC that certain members of [Sunflower] began to
countersign petitioners daily time records to make it appear that they (petitioners) were under the
control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx
Even without these instances indicative of control by SMC over the petitioners, it is safe to assume
that SMC would never have allowed the petitioners to work within its premises, using its own
facilities, equipment and tools, alongside SMC employees discharging similar or identical activities
unless it exercised a substantial degree of control and supervision over the petitioners not only as
to the manner they performed their functions but also as to the end results of such functions.
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent
contractors.[Sunflower] and the petitioners did not have substantial capital or investment in the
form of tools, equipment, implements, work premises, et cetera necessary to actually perform the
service under their own account, responsibility, and method. The only "work premises" maintained
by [Sunflower] was a small office within the confines of a small "carinderia" or refreshment parlor
owned by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo,

pp. 525-525) and, the only assets it provided SMC were the bare bodies of its members, the
petitioners herein (rollo, p. 523).
In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the
control and supervision of SMC both as to the manner and method in discharging their functions
and as to the resultsthereof.
Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners,
janitors, messengers and shrimp harvesters, packers and handlers were directly related to the
aquaculture business of SMC (See Guarin vs. NLRC, 198 SCRA 267, 273). This is confirmed by
the renewal of the service contract from January 1993 to September 1995, a period of close to three
(3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce
and raises the suspicion that the non-exclusive service contract between SMC and [Sunflower] was
"designed to evade the obligations inherent in an employer-employee relationship" (See RhonePoulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower]
and its [Sunflower] retained counsel are both partners of the local counsel of SMC (rollo, p. 9).
xxx
With these observations, no other logical conclusion can be reached except that [Sunflower] acted
as an agent of SMC, facilitating the manpower requirements of the latter, the real employer of the
petitioners. We simply cannot allow these two entities through the convenience of a non-exclusive
service contract to stipulate on the existence of employer-employee relation. Such existence is a
question of law which cannot be made the subject of agreement to the detriment of the petitioners
(Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500).
xxx
There being a finding of "labor-only" contracting, liability must be shouldered either by SMC or
[Sunflower] or shared by both (See Tabas vs. California Manufacturing, Inc., supra, p. 502). SMC
however should be heldsolely liable for [Sunflower] became non-existent with the closure of
the aquaculture business of SMC.
Furthermore, since the closure of the aquaculture operations of SMC appears to be valid,
reinstatement is no longer feasible. Consistent with the pronouncement in Bustamante, et al., vs.
NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus entitled to separation pay (in the
computation similar to those given to regular SMC employees at its Bacolod Shrimp Processing
Plant) "with full backwages, inclusive of allowances and other benefits or their monetary
equivalent, from the time their actual compensation was withheld from them" up to the time of the
finality of this decision. This is without prejudice to differentials pays (sic) effective as of and from
the time petitioners acquired regular employment status pursuant to the discussion mentioned
above, and all such other and further benefits as provided by applicable collective bargaining
agreement(s) or other relations, or by law, beginning such time up to their termination from
employment on 11 September 1995.16 (Emphasis and underscoring supplied)

SMCs Motion for Reconsideration17 having been denied for lack of merit by Resolution of July 11,
2001, it comes before this Court via the present petition for review on certiorari assigning to the CA
the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING
RESPONDENTS PATENTLY DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF
APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS
COMPLAINANTS IN THE CASE BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF
APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF
SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT
ENTITLED TO ANY RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS
DUE TO SERIOUS BUSINESS LOSSES.18 (Underscoring supplied)
SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only
three out of the ninety seven named petitioners signed the verification and certification against
forum-shopping.
While the general rule is that the certificate of non-forum shopping must be signed by all the
plaintiffs or petitioners in a case and the signature of only one of them is insufficient,19 this Court
has stressed that the rules on forum shopping, which were designed to promote and facilitate the
orderly administration of justice, should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective.20 Strict compliance with the provisions regarding
the certificate of non-forum shopping merely underscores its mandatory nature in that the
certification cannot be altogether dispensed with or its requirements completely disregarded.21It
does not, however, thereby interdict substantial compliance with its provisions under justifiable
circumstances.22
Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes
Subdivision Homeowners Association,23 this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a
group, represented by their homeowners association president who was likewise one of the
plaintiffs, Mr. Samaon M. Buat.Respondents raised one cause of action which was the breach of
contractual obligations and payment of damages. They shared a common interest in the subject
matter of the case, being the aggrieved residents of the poorly constructed and developed Emily
Homes Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M.

Buat could validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In
cases therefore where it is highly impractical to require all the plaintiffs to sign the certificate of
non-forum shopping, it is sufficient, in order not to defeat the ends of justice, for one of the
plaintiffs, acting as representative, to sign the certificate provided that xxx the plaintiffs share a
common interest in the subject matter of the case or filed the case as a "collective," raising
only one common cause of action or defense.24 (Emphasis and underscoring supplied)
Given the collective nature of the petition filed before the appellate court by herein private
respondents, raising one common cause of action against SMC, the execution by private
respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of all the other private
respondents of the certificate of non-forum shopping constitutes substantial compliance with the
Rules.25 That the three indeed represented their co-petitioners before the appellate court is, as it
correctly found, "subsequently proven to be true as shown by the signatures of the majority of the
petitioners appearing in their memorandum filed before Us."26
Additionally, the merits of the substantive aspects of the case may also be deemed as "special
circumstance" or "compelling reason" to take cognizance of a petition although the certification
against forum shopping was not executed and signed by all of the petitioners.27
SMC goes on to argue that the petition filed before the CA is fatally defective as it was not
accompanied by "copies of all pleadings and documents relevant and pertinent thereto" in
contravention of Section 1, Rule 65 of the Rules of Court.28
This Court is not persuaded. The records show that private respondents appended the following
documents to their petition before the appellate court: the September 23, 1997 Decision of the
Labor Arbiter,29 their Notice of Appeal with Appeal Memorandum dated October 16, 1997 filed
before the NLRC,30 the December 29, 1998NLRC D E C I S I O
N,31 their Motion for Reconsideration dated March 26, 1999 filed with the NLRC32 and the
September 10, 1999 NLRC Resolution.33
It bears stressing at any rate that it is the appellate court which ultimately determines if the
supporting documents are sufficient to make out a prima facie case.34 It discerns whether on the
basis of what have been submitted it could already judiciously determine the merits of the
petition.35 In the case at bar, the CA found that the petition was adequately supported by relevant
and pertinent documents.
At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a
certificate of non-forum shopping in the following cases: (1) where a rigid application will result in
manifest failure or miscarriage of justice; (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.36
Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of
justice. Their strict and rigid application, which would result in technicalities that tend to frustrate
rather than promote substantial justice, must always be eschewed.37
SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of
the labor arbiter and the NLRC as "findings of facts of quasi-judicial bodies like the NLRC are

accorded great respect and finality," and that this principle acquires greater weight and application
in the case at bar as the labor arbiter and the NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an administrative agency which has acquired
expertise in the particular field of its endeavor are accorded great weight on appeal.38 The rule is
not absolute and admits of certain well-recognized exceptions, however. Thus, when the findings of
fact of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment
was based on a misapprehension of facts, the appellate court may make an independent evaluation
of the facts of the case.39
SMC further faults the appellate court in giving due course to private respondents petition despite
the fact that the complaint filed before the labor arbiter was signed and verified only by private
respondent Winifredo Talite; that private respondents position paper40 was verified by only
six41 out of the ninety seven complainants; and that their Joint-Affidavit42 was executed only by
twelve43 of the complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not
have been considered by the appellate court in establishing the claims of those who did not sign the
same, citing this Courts ruling in Southern Cotabato Development and Construction, Inc. v. NLRC.44
SMCs position does not lie.
A perusal of the complaint shows that the ninety seven complainants were being represented by
their counsel of choice. Thus the first sentence of their complaint alleges: "xxx complainants, by
counsel and unto this Honorable Office respectfully state xxx." And the complaint was signed by
Atty. Jose Max S. Ortiz as "counsel for the complainants." Following Section 6, Rule III of the 1990
Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is
presumed to be properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one of the
complainants and was causing the preparation of the complaint "with the authority of my cocomplainants" indubitably shows that Talite was representing the rest of his co-complainants in
signing the verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section
8, Rule 3 of the 1999 NLRC Rules, which states:
Section 7. Authority to bind party. Attorneys and other representatives of parties shall have
authority to bind their clients in all matters of procedure; but they cannot, without a special power
of attorney or express consent, enter into a compromise agreement with the opposing party in full
or partial discharge of a clients claim. (Underscoring supplied)
As regards private respondents position paper which bore the signatures of only six of them,
appended to it was an Authority/Confirmation of Authority45 signed by the ninety one others
conferring authority to their counsel "to file RAB Case No. 06-07-10316-95, entitled Winifredo
Talite et al. v. San Miguel Corporation presently pending before the sala of Labor Arbiter Ray Alan
Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City" and appointing him as their
retained counsel to represent them in the said case.
That there has been substantial compliance with the requirement on verification of position papers
under Section 3, Rule V of the 1990 NLRC Rules of Procedure46 is not difficult to appreciate in light

of the provision of Section 7, Rule V of the 1990 NLRC Rules, now Section 9, Rule V of the 1999
NLRC Rules which reads:
Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be non-litigious in
nature. Subject to the requirements of due process, the technicalities of law and procedure and the
rules obtaining in the courts of law shall not strictly apply thereto. The Labor Arbiter may avail
himself of all reasonable means to ascertain the facts of the controversy speedily, including ocular
inspection and examination of well-informed persons. (underscoring supplied)
As regards private respondents Joint-Affidavit which is being assailed in view of the failure of some
complainants to affix their signatures thereon, this Court quotes with approval the appellate courts
ratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the
whole text of paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads:
"Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit
their affidavits nor appear during trial and in whose favor no other independent evidence was
adduced, no award for back wages could have been validly and properly made for want of factual
basis. There is no showing at all that any of the affidavits of the thirty-four (34) complainants were
offered as evidence for those who did not submit their affidavits, or that such affidavits had any
bearing at all on the rights and interest of the latter. In the same vein, private respondents position
paper was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered as evidence
for those who did not submit theirs, or the affidavits were material and relevant to the rights
and interest of the latter, such affidavits may be sufficient to establish the claims of those
who did not give their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants
(petitioners herein) would readily reveal that the affidavit was offered as evidence not only for the
signatories therein but for all of the complainants. (These ninety-seven (97) individuals were
previously identified during the mandatory conference as the only complainants in the proceedings
before the labor arbiter) Moreover, the affidavit touched on the common interest of all of the
complainants as it supported their claim of the existence of an employer-employee relationship
between them and respondent SMC. Thus, the said affidavit was enough to prove the claims of the
rest of the complainants.47 (Emphasis supplied, underscoring in the original)
In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not
control proceedings before the Labor Arbiter. So Article 221 of the Labor Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement. In any
proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in
courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process. xxx
As such, their application may be relaxed to serve the demands of substantial justice.48

On the merits, the petition just the same fails.

SMC insists that private respondents are the employees of Sunflower, an independent contractor.
On the other hand, private respondents assert that Sunflower is a labor-only contractor.
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with
another person for the performance of the formers work, the employees of the contractor and of
the latters subcontractor, if any shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
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.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by
Department Order No. 18, distinguishes between legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there
exists a trilateral relationship under which there is a contract for a specific job, work or service
between the principal and the contractor or subcontractor, and a contract of employment between
the contractor or subcontractor and its workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the capacity to independently undertake
the performance of the job, work or service, and the contractual workers engaged by the contractor
or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby
declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where
the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work
or service for a principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such

contractor or subcontractor are performing activities which are directly related to the main
business of the principal, or
ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case
of corporations, tools, equipment, implements, machineries and work premises, actually and
directly used by the contractor or subcontractor in the performance or completion of the job, work
or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether one claiming to be
an independent contractor has contracted to do the work according to his own methods and
without being subject to the control of the employer, except only as to the results of the
work.49
In legitimate labor contracting, the law creates an employer-employee relationship for a limited
purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes
jointly and severally liable with the job contractor, only for the payment of the employees wages
whenever the contractor fails to pay the same. Other than that, the principal employer is not
responsible for any claim made by the employees.50
In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal employer.51
The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the
existence of an employer-employee relationship between SMC and private respondents. The
language of a contract is not, however, determinative of the parties relationship; rather it is the
totality of the facts and surrounding circumstances of the case.52 A party cannot dictate, by the mere
expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as
labor-only contractor or job contractor, it being crucial that its character be measured in terms of
and determined by the criteria set by statute.53
SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative
if it had no substantial capital.54
While indeed Sunflower was issued Certificate of Registration No. IL0-87555 on February 10, 1992
by the Cooperative Development Authority, this merely shows that it had at least P2,000.00 in paidup share capital as mandated by Section 5 of Article 1456 of Republic Act No. 6938, otherwise
known as the Cooperative Code, which amount cannot be considered substantial capitalization.

What appears is that Sunflower does not have substantial capitalization or investment in the form
of tools, equipment, machineries, work premises and other materials to qualify it as an independent
contractor.
On the other hand, it is gathered that the lot, building, machineries and all other working tools
utilized by private respondents in carrying out their tasks were owned and provided by SMC.
Consider the following uncontroverted allegations of private respondents in the Joint Affidavit:
[Sunflower], during the existence of its service contract with respondent SMC, did not own a single
machinery, equipment, or working tool used in the processing plant. Everything was owned and
provided by respondent SMC. The lot, the building, and working facilities are owned by respondent
SMC. The machineries and equipments (sic) like washer machine, oven or cooking machine, sizer
machine, freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were
all owned by respondent SMC. All the boxes, trays, molding pan used in the processing are also
owned by respondent SMC. The gloves and boots used by the complainants were also owned by
respondent SMC. Even the mops, electric floor cleaners, brush, hoose (sic), soaps, floor waxes,
chlorine, liquid stain removers, lysol and the like used by the complainants assigned as cleaners
were all owned and provided by respondent SMC.
Simply stated, third-party respondent did not own even a small capital in the form of tools,
machineries, or facilities used in said prawn processing
xxx
The alleged office of [Sunflower] is found within the confines of a small "carinderia" or
"refreshment" (sic) owned by the mother of the Cooperative Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. 57
And from the job description provided by SMC itself, the work assigned to private respondents
was directly relatedto the aquaculture operations of SMC. Undoubtedly, the nature of the work
performed by private respondents in shrimp harvesting, receiving and packing formed an integral
part of the shrimp processing operations of SMC. As for janitorial and messengerial services, that
they are considered directly related to the principal business of the employer58 has been
jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the performance of
its service contract according to its own manner and method, free from the control and supervision
of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that
their daily time records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari
Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows that SMC
exercised the power of control and supervision over its employees.59 And control of the premises in
which private respondents worked was by SMC. These tend to disprove the independence of the
contractor.60
More. Private respondents had been working in the aqua processing plant inside the SMC
compound alongside regular SMC shrimp processing workers performing identical jobs under the

same SMC supervisors.61 This circumstance is another indicium of the existence of a labor-only
contractorship.62
And as private respondents alleged in their Joint Affidavit which did not escape the observation of
the CA, no showing to the contrary having been proffered by SMC, Sunflower did not cater to clients
other than SMC,63 and with the closure of SMCs Bacolod Shrimp Processing Plant, Sunflower
likewise ceased to exist. This Courts ruling in San Miguel Corporation v. MAERC Integrated Services,
Inc.64 is thus instructive.
xxx Nor do we believe MAERC to have an independent business. Not only was it set up to
specifically meet the pressing needs of SMC which was then having labor problems in its
segregation division, none of its workers was also ever assigned to any other establishment, thus
convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of
relationship between MAERC and SMC followed MAERCs cessation of operations, the loss of jobs
for the whole MAERC workforce and the resulting actions instituted by the
workers.65(Underscoring supplied)
All the foregoing considerations affirm by more than substantial evidence the existence of an
employer-employee relationship between SMC and private respondents.
Since private respondents who were engaged in shrimp processing performed tasks usually
necessary or desirable in the aquaculture business of SMC, they should be deemed regular
employees of the latter66 and as such are entitled to all the benefits and rights appurtenant to
regular employment.67 They should thus be awarded differential pay corresponding to the
difference between the wages and benefits given them and those accorded SMCs other regular
employees.1awphi1.zw+
Respecting the private respondents who were tasked with janitorial and messengerial duties, this
Court quotes with approval the appellate courts ruling thereon:
Those performing janitorial and messengerial services however acquired regular status only after
rendering one-year service pursuant to Article 280 of the Labor Code. Although janitorial and
messengerial services are considered directly related to the aquaculture business of SMC, they are
deemed unnecessary in the conduct of its principal business; hence, the distinction (See Coca Cola
Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v.
NLRC, supra, p. 359).68
The law of course provides for two kinds of regular employees, namely: (1) those who are engaged
to perform activities which are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed.69
As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall
under the second category and are thus entitled to differential pay and benefits extended to other
SMC regular employees from the day immediately following their first year of service.70
Regarding the closure of SMCs aquaculture operations and the consequent termination of private
respondents, Article 283 of the Labor Code provides:

ART. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions
of this Title, by serving a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination due to
the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at
least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least
six (6) months shall be considered one (1) whole year. (Underscoring supplied)
In the case at bar, a particular department under the SMC group of companies was closed allegedly
due to serious business reverses. This constitutes retrenchment by, and not closure of, the
enterprise or the company itself as SMC has not totally ceased operations but is still very much an
on-going and highly viable business concern.71
Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It
is, however, subject to faithful compliance with the substantive and procedural requirements laid
down by law and jurisprudence.72
For retrenchment to be considered valid the following substantial requirements must be met: (a)
the losses expected should be substantial and not merely de minimis in extent; (b) the substantial
losses apprehended must be reasonably imminent such as can be perceived objectively and in good
faith by the employer; (c) the retrenchment must be reasonably necessary and likely to effectively
prevent the expected losses; and (d) the alleged losses, if already incurred, and the expected
imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.73
In the discharge of these requirements, it is the employer who has the onus, being in the nature of
an affirmative defense.74
Normally, the condition of business losses is shown by audited financial documents like yearly
balance sheets, profit and loss statements and annual income tax returns. The financial statements
must be prepared and signed by independent auditors failing which they can be assailed as selfserving documents.75
In the case at bar, company losses were duly established by financial documents audited by Joaquin
Cunanan & Co. showing that the aquaculture operations of SMCs Agribusiness Division
accumulated losses amounting toP145,848,172.00 in 1992 resulting in the closure of its Calatrava
Aquaculture Center in Negros Occidental,P11,393,071.00 in 1993 and P80,325,608.00 in 1994
which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod
Shrimp Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of its employees.
For termination due to retrenchment to be valid, however, the law requires that written notices of
the intended retrenchment be served by the employer on the worker and on the DOLE at least one
(1) month before the actual date of the retrenchment,76 in order to give employees some time to

prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the
verity of the alleged cause of termination.77
Private respondents, however, were merely verbally informed on September 10, 1995 by SMC
Prawn Manager Ponciano Capay that effective the following day or on September 11, 1995, they
were no longer to report for work as SMC would be closing its operations.78
Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the
employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal
process was initiated by the employers exercise of his management prerogative, as opposed to a
dismissal based on a just cause under Article 282 with the same procedural infirmity where the
sanction to be imposed upon the employer should be tempered as the dismissal process was, in
effect, initiated by an act imputable to the employee.79
In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private
respondent as nominal damages.
The grant of separation pay as an incidence of termination of employment due to retrenchment to
prevent losses is a statutory obligation on the part of the employer and a demandable right on the
part of the employee. Private respondents should thus be awarded separation pay equivalent to at
least one (1) month pay or to at least one-half month pay for every year of service, whichever is
higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to
other regular SMC employees that were terminated as a result of the retrenchment, depending on
which is most beneficial to private respondents.
Considering that private respondents were not illegally dismissed, however, no backwages need be
awarded. It is well settled that backwages may be granted only when there is a finding of illegal
dismissal.80 The appellate court thus erred in awarding backwages to private respondents upon the
authority of Bustamante v. NLRC,81 what was involved in that case being one of illegal dismissal.
With respect to attorneys fees, in actions for recovery of wages or where an employee was forced
to litigate and thus incurred expenses to protect his rights and interests,82 a maximum of ten
percent (10%) of the total monetary award83 by way of attorneys fees is justifiable under Article
111 of the Labor Code,84 Section 8, Rule VIII, Book III of its Implementing Rules,85 and paragraph 7,
Article 2208 of the Civil Code.86 Although an express finding of facts and law is still necessary to
prove the merit of the award, there need not be any showing that the employer acted maliciously or
in bad faith when it withheld the wages. There need only be a showing that the lawful wages were
not paid accordingly, as in this case.87
Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant
to Rule VIII-A, Section 1988 of the Omnibus Rules Implementing the Labor Code, Sunflower is held
solidarily liable with SMC for all the rightful claims of private respondents.
WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution
dated July 11, 2001 of the Court of Appeals are AFFIRMED with MODIFICATION.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED
to jointly and severally pay each private respondent differential pay from the time they became
regular employees up to the date of their termination; separation pay equivalent to at least one (1)
month pay or to at least one-half month pay for every year of service, whichever is higher, as

mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular
SMC employees that were terminated as a result of the retrenchment, depending on which is most
beneficial to private respondents; and ten percent (10%) attorneys fees based on the herein
modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount
ofP50,000.00, representing nominal damages for non-compliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.

G.R. No. 134468

August 29, 2002

NATIONAL STEEL CORPORATION petitioner,

vs.
COURT OF APPEALS, FORMER FIFTH DIVISION, RENE OFRENEO, in his capacity as Voluntary
Arbitrator, and NSC-HDCTC MONTHLY-DAILY EMPLOYEES ORGANIZATION-FFW, respondents.
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the
reversal of the Resolution of the Court of Appeals dated November 25, 19971 which dismissed
National Steel Corporations petition for review on the ground that the verification and certification
of non-forum shopping were signed not by the petitioner but by its counsel of record, as well as the
subsequent Resolution dated July 2, 19982 which denied petitioners motion for reconsideration.
The antecedent facts of the case are as follows:
In December of 1993, a dispute arose between petitioner National Steel Corporation (NSC) and
respondent NSC-HDCTC Monthly/Daily Employees Organization-FFW (union) regarding the grant
of Productivity and Quality Bonus and the Fiscal Year-End Incentive Award in the company. Both
parties agreed to submit the case for voluntary arbitration.
On April 3, 1995, representatives of NSC and the union appeared before Voluntary Arbitrator Rene
Ofreneo and defined the issues of their dispute thus:
"Whether or not there was a diminution of the 1993 Fiscal Year-End Productivity and Quality
Profit-Sharing Incentive Benefit annually granted by the Company, per CBA, and if there was,
whether or not there was just cause for the diminution of this benefit by management, and if
without just cause, what should be the remedy."3
The union was of the position that the company violated Article XII, Section 3 of their CBA when it
stopped, since 1993, giving Productivity and Quality Bonus and Fiscal Year-End Incentive Award.
Said CBA provision provides:
"ARTICLE XII
ECONOMIC ADJUSTMENTS
xxx

"SECTION 3. Productivity and Quality Bonus The COMPANY shall grant productivity and quality
bonus whenever, in the exclusive determination of the COMPANY, the production and quality
targets for the immediately preceding period justify the granting of such bonus. The amount of the
bonus shall be left to the sole discretion of the COMPANY.
"The productivity and quality bonus provided herein shall be separate from and in addition to the
13th month pay provided by law and the fiscal year-end incentive award traditionally granted by the
COMPANY."4
The union claimed that these benefits were demandable because the granting of such benefits was
not only provided for by the CBA but had also become the practice in the firm from 1989 to 1993.
Also, the incentive pay was not dependent on the profit situation of the company since the company
gave the incentive pay in 1989 and 1990 despite the latters admission of difficult financial
operations.5
The company on the other hand contended that the matter of granting productivity and quality
bonus was discretionary on its part consistent with its exercise of management prerogatives and
assessment of production targets, while the distribution of the Fiscal Year-End Incentive Award
was dependent on corporate performance.6
On July 19, 1996 public respondent Voluntary Arbitrator Ofreneo issued a decision ruling as
follows:
" 1. There is no merit in the demand of the Union for a productivity and quality bonus in 1993.
" 2. The demand of the Union for the distribution of the year-end incentive award is in order.
" 3. The said incentive award shall be computed based on the Companys past practice in the
determination of such award.
"SO ORDERED."7
On August 2, 1996, the NSC filed a Partial Motion for Reconsideration8 with respect to the award of
the year-end incentive which was denied by Arbitrator Ofreneo.9 On October 31, 1996, the NSC filed
a petition for review with the Court of Appeals.10
On November 25, 1997, the Court of Appeals issued a Resolution dismissing the companys petition
for review on the ground that it failed to comply with the requirements of Revised Circular No. 2891 and Administrative Circular No. 04-94 on forum shopping. The pertinent portions of the decision
read:
"xxx We hold that Atty. Roberto C. Padilla, one of the counsels of record, then, of the petitioner is
not a real party in interest or 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 but a retained counsel with mere incidental
interest and therefore, not the petitioner or plaintiff, petitioner, applicant or principal party
seeking relief required by law to certify under oath to the facts and/or undertakings stated in
Revised Circular No. 28-91 and Administrative Circular No. 04-94."
"Consequently, the Court hereby RESOLVES to GRANT the `Motion to Dismiss Appellants Petition
for Review.
"SO ORDERED."11

On December 17, 1997, NSC filed a Motion for Reconsideration12 of the resolution. But this was
denied in a Resolution13 dated July 2, 1998 where the appellate court found that:
"x x x absent any authority from the petitioner corporations board of directors to sue in its behalf,
the counsel of record is without personality to sue x x x.
"xxx

xxx

xxx

"ACCORDINGLY, the Motion for Reconsideration filed by the petitioner NATIONAL STEEL
CORPORATION is DENIED.
"SO ORDERED."14
Hence this petition raising the following grounds:
"A. NSCS COUNSEL OF RECORD WAS DULY AUTHORIZED TO REPRESENT NSC IN THE
PREPARATION OF THE PETITION FOR REVIEW FILED BEFORE THE COURT OF APPEALS.
"B. THE VERIFICATION CUM CERTIFICATION OF PETITIONERS COUNSEL OF RECORD WAS
TRUTHFUL IN ALL RESPECTS.
"C. THE DISMISSAL OF THE PETITION FOR REVIEW BEFORE THE COURT OF APPEALS ON A
PURELY TECHNICAL GROUND VIOLATES PETITIONERS RIGHT TO DUE PROCESS AND
OPPRESSIVELY DEPRIVED THE LATTER OF SUBSTANTIVE JUSTICE."15
Simply stated, the pertinent issues of this case are as follows: (1) May the signature of petitioners
counsel be deemed sufficient for the purposes of Revised Circular No. 28-91 and Administrative
Circular No. 04-94; and (2) granting that the petition a quo should have been allowed, did the
voluntary arbitrator commit any error in granting the demand of the union for the distribution of
the year-end incentive award?
We will first resolve the issue on the certification against forum shopping.
Circular No. 28-91 was put in place to deter the practice of some party-litigants of simultaneously
pursuing remedies in different forums for such practice works havoc upon orderly judicial
procedure.16
In the case at bar, the certification was signed by petitioners counsel. Petitioner argues that
contrary to the findings of the Court of Appeals, NSCs counsel of record was duly authorized to
represent them not only before the Voluntary Arbitrator but also to prepare the petition for review
filed before the Court of Appeals. To support this claim, petitioner attached to its petition before
this Court a Secretarys Certificate dated December 16, 1997 which states that:
"x x x [B]ased on the records of the Corporation, Atty. Roberto C. Padilla, with office address at the
2ndfloor, Chere Bldg., Del Pilar St., Iligan City is the legal counsel of the Corporation on a general
retainer and is duly authorized to represent the latter and to act on its behalf in several cases,
including "National Steel Corporation v. Rene E. Ofreneo and NSC-HDCTC Monthly-Daily Employees
Organization-FFW", docketed as CA-G.R. SP No. 42431 before the Fifth Division of the Court of
Appeals."17

Counsel of petitioner, Atty. Padilla also submitted a Verification cum Certification where he stated
that he prepared the petition upon the explicit instructions of the VP-Marketing & Resident
Manager of petitioner corporation.18
Petitioner explains that powers of corporations organized under the Corporation Code shall be
exercised by the board of directors; that the exercise of such powers may be done indirectly
through delegation; that pursuant to the exercise of its powers, the corporation through its Board of
Directors, may employ such persons as it may need to carry on the operations of the corporate
business; that hence, with the express authorization by NSCs board of directors, Atty. Padilla was
conferred with enough authority to sign the Verification cum Certification in the petition for review
filed before the Court of Appeals;19 that assuming arguendo there is no express authorization from
NSC, still Atty. Padilla is impliedly authorized to file the petition for review before the Court of
Appeals in line with its obligation to take all steps or do all acts necessary or incidental to the
regular and orderly prosecution or management of the suit; that respondent union never
questioned the authority of Atty. Padilla to represent NSC in the proceedings before the Voluntary
Arbitrator; that the union is therefore absolutely estopped from questioning Atty. Padillas
authority to file the petition for review before the Court of Appeals;20 that the dismissal of the
petition for review on a purely technical ground violated petitioners right to due process and
oppressively deprived it of substantive justice as enunciated in Section 6, Rule 1, as well as previous
rulings of this Court which upheld the primacy of substantial justice over technical rules of
procedure.21
For its part, respondent union claims that petitioner violated Rule 13, Section 11 of the Rules of
Court anent the priorities in modes of service and filing;22 that the Court of Appeals did not err in
dismissing NSCs petition for review because it was not duly verified by the petitioner as required
by the rules; that the petition filed before the appellate court did not have a Secretarys Certificate
stating the authority of Atty. Padilla to represent petitioner corporation; and that it was only after
the Court of Appeals dismissed their petition in a Resolution dated November 25, 1997 that
petitioner attached said Certificate dated December 16, 1997.23
We rule in favor of petitioner and hold that the Court of Appeals erred in dismissing the petition.
In the case of BA Savings Bank vs. Sia,24 this Court has ruled that the certificate of non-forum
shopping required by Supreme Court Circular No. 28-91 may be signed, for and on behalf of a
corporation, by a specifically authorized lawyer who has personal knowledge of the facts required
to be disclosed in such document.
The reason is that:
"Unlike natural persons, corporations may perform physical actions only through properly
delegated individuals; namely, its officers and/or agents.
"xxx

xxx

xxx

"The corporation, such as the petitioner, has no powers except those expressly conferred on it by
the Corporation Code and those that are implied by or are incidental to its existence. In turn, a
corporation exercises said powers through its board of directors and / or its duly authorized
officers and agents. Physical acts, like the signing of documents, can be performed only by natural
persons duly authorized for the purpose by corporate by-laws or by specific act of the board of
directors. `All acts within the powers of a corporation may be performed by agents of its selection;

and, except so far as limitations or restrictions which may be imposed by special "charter, by-law,
or statutory provisions, the same general principles of law which govern the relation of agency for a
natural person govern the officer or agent of a corporation, of whatever status or rank, in respect to
his power to act for the corporation; and agents once appointed, or members acting in their stead,
are subject to the same rules, liabilities and incapacities as are agents of individuals and private
persons.
"xxx

xxx

xxx

"x x x For who else knows of the circumstances required in the Certificate but its own retained
counsel. Its regular officers, like its board chairman and president, may not even know the details
required therein."25
While it is admitted that the authorization of petitioners counsel was submitted to the appellate
court only after the issuance of its Resolution dismissing the petition based on non-compliance with
the aforesaid Circular, we hold that in view of the peculiar circumstances of the present case and in
the interest of substantial justice, the procedural defect may be set aside, pro hac vice. As held by
the Court: "Technical rules of procedure should be used to promote, not frustrate, justice. While the
swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an
even more urgent ideal."26 By recognizing the signature of the authorized counsel in the
certification, no circumvention of the rationale, that is to prevent the ills of forum shopping, is
committed.27 As we have held in many cases:
"x x x Circular No. 28-91 was designed to serve as an instrument to promote and facilitate the
orderly administration of justice and should not be so interpreted with such absolute literalness as
to subvert its own ultimate and legitimate objective or the goal of all rules of procedure --which is
to achieve substantial justice as expeditiously as possible.
"The fact that the Circular requires that it be strictly complied with merely underscores its
mandatory nature in that it cannot be dispensed with or its requirements altogether disregarded,
but it does not thereby interdict substantial compliance with its provisions under justifiable
circumstances."28
We will now delve into the merits of the case.
Petitioner NSC assails the following portions of the award of the Voluntary Arbitrator:
"In view of the foregoing, therefore, the Voluntary Arbitrator rules as follows:
"xxx

xxx

xxx

"2. The demand of the Union for the distribution of the year-end incentive award is in order.
"3. The said incentive award shall be computed based on the Companys past practice in the
determination of such award.
"SO ORDERED."29
Petitioner claims that the Voluntary Arbitrator erred when he ordered petitioner to pay private
respondent the 1993 fiscal year-end incentive award despite his own findings that the mid-year
incentive pay already paid by the petitioner is an advance payment of the fiscal year-end incentive
award;30 that the "Mid-year Incentive Pay" granted to private respondent is itself a bonus not

demandable upon NSC as it is not provided for in the CBA; that this notwithstanding, it has granted
the Mid-year Incentive Pay to members of respondent union every year in the years 1989, 1990,
1991, 1992, and 1993; that in every instance of the grant, petitioner expressly stated that the Midyear Incentive Pay is an advance against the Fiscal Year-end Incentive Pay; that petitioners express
reservation that the payment of the Mid-year Incentive Pay is an advance payment of the fiscal
year-end incentive award has been repeatedly brought to the attention of the Voluntary
Arbitrator;31 that the Voluntary Arbitrator committed serious misapprehension of facts when he
ruled that the grant of the fiscal year-end incentive award has become traditional and has therefore
ripened into a demandable right of private respondent;32 and that for a period of four (4) years i.e.,
from 1990 through 1993, the fiscal year-end incentive award has been granted only twice -- in 1991
and in 1992.33
In his Award, the Voluntary Arbitrator established as a fact that:
"x x x the Company gave the following benefits to the workers:
"1. Mid-Year Incentive Pay, which was usually given as an "advance" for the Year-End Incentive
Bonus. The Company announced the Mid-Year Incentive Pay through memos issued on the
following dates:
August 25, 1989,
August 1, 1990,
August 2, 1991,
August 24,1992, and
August 31, 1993."34
Yet, petitioner complains that despite the above findings that the Mid-year Incentive Awards were
given as advances to the Year-End Incentive Awards, the Voluntary Arbitrator still ruled that the
NSC was liable to pay respondent Union the Year-End Incentive Pay, explaining that:
"xxx

xxx

xxx

"In the case of the fiscal year-end incentive award, the CBA provision has a general proviso which
reads: `The productivity and quality bonus provided herein shall be separate from and in addition
to the 13th month pay provided by law and the fiscal year-end incentive award traditionally granted
by the COMPANY. Thus, unlike in the productivity and quality bonus, the CBA simply recognizes the
fiscal year-end incentive award as one of the benefits accorded to the workers, just like the
13th month pay. It even added the phrase `traditionally granted by the COMPANY. There were no
qualifications or conditions specified for the granting of this benefit similar to those governing the
granting of the productivity and quality bonus. The Company argued that like the productivity and
quality bonus, the granting of year-end incentive award is a management prerogative and is guided
by the same conditions, e.g., actual performance versus production targets, that it uses when it
decides on the granting of productivity and quality bonus. As "pointed out, the CBA is silent on this.
And if there are doubts on the interpretation of the manner by which benefits like year-end
incentive award shall be given, the Labor Code has long ago decided that all such doubts shall be
interpreted in favor of Labor.

"Moreover, the capacity of the Company to grant this incentive pay is also not at issue. A closer
scrutiny of the Company loss for 1993 shows that the net loss of P36 million registered for that year
was due to the deduction of `expenses paid in retained earnings amounting to P358 "million from
the original P322 million net income. The audited data gathered by the Union from the Commission
on Audit also show that while earnings and incomes declined from 1992 to 1993, the Company still
registered a healthy level of profitability."35
We rule in favor of petitioner.
This Court has stressed that voluntary arbitrators, by the nature of their functions, act in quasijudicial capacity. Hence, as a rule, findings of facts by quasi-judicial bodies which have acquired
expertise because their jurisdiction is confined to specific matters, are accorded not only respect
but even finality if they are supported by substantial evidence, even if not overwhelming or
preponderant.36 However, in spite of statutory provisions making "final" the decisions of certain
administrative agencies, we have taken cognizance of petitions questioning such decisions where
want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice,
or erroneous interpretation of the law were brought to our attention.37
In the present petition for review on certiorari, we find the award of the 1993 year-end incentive to
be patently erroneous which amounts not only to grave abuse of discretion but also to denial of
substantial justice. The Voluntary Arbitrator himself found that the mid-year incentive pay for 1993
was given by petitioner as an advance payment of the fiscal year-end incentive award for the same
year. Indubitably, to require petitioner to pay again the same incentive pay at the year-end of 1993
is obviously a great injustice that would be committed against petitioner.
WHEREFORE, we SET ASIDE the Resolutions dated November 25, 1997 and July 2, 1998 of the
Court of Appeals.
The Award of Voluntary Arbitrator Ofreneo dated July 19, 1996 is modified to the effect that the
grant of the claim for the distribution of the 1993 year-end incentive award is DELETED.
SO ORDERED.

G.R. No. 175512

May 30, 2011

VALLACAR TRANSIT, INC., Petitioner,

vs.
JOCELYN CATUBIG, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
For review under Rule 45 of the Rules of Court is the Decision1 dated November 17, 2005 and the
Resolution2dated November 16, 2006 of the Court Appeals in CA-G.R. CV No. 66815, which modified

the Decision3 dated January 26, 2000 of the Regional Trial Court (RTC), Branch 30 of Dumaguete
City, in Civil Case No. 11360, an action for recovery of damages based on Article 2180, in relation to
Article 2176, of the Civil Code, filed by respondent Jocelyn Catubig against petitioner Vallacar
Transit, Inc. While the RTC dismissed respondents claim for damages, the Court of Appeals granted
the same.
The undisputed facts are as follows:
Petitioner is engaged in the business of transportation and the franchise owner of a Ceres Bulilit
bus with Plate No. T-0604-1348. Quirino C. Cabanilla (Cabanilla) is employed as a regular bus
driver of petitioner.
On January 27, 1994, respondents husband, Quintin Catubig, Jr. (Catubig), was on his way home
from Dumaguete City riding in tandem on a motorcycle with his employee, Teddy Emperado
(Emperado). Catubig was the one driving the motorcycle. While approaching a curve at kilometers
59 and 60, Catubig tried to overtake a slow moving ten-wheeler cargo truck by crossing-over to the
opposite lane, which was then being traversed by the Ceres Bulilit bus driven by Cabanilla, headed
for the opposite direction. When the two vehicles collided, Catubig and Emperado were thrown
from the motorcycle. Catubig died on the spot where he was thrown, while Emperado died while
being rushed to the hospital.
On February 1, 1994, Cabanilla was charged with reckless imprudence resulting in double homicide
in Criminal Case No. M-15-94 before the Municipal Circuit Trial Court (MCTC) of Manjuyod-BindoyAyungon of the Province of Negros Oriental. After preliminary investigation, the MCTC issued a
Resolution on December 22, 1994, dismissing the criminal charge against Cabanilla. It found that
Cabanilla was not criminally liable for the deaths of Catubig and Emperado, because there was no
negligence, not even contributory, on Cabanillas part.
Thereafter, respondent filed before the RTC on July 19, 1995 a Complaint for Damages against
petitioner, seeking actual, moral, and exemplary damages, in the total amount of P484,000.00, for
the death of her husband, Catubig, based on Article 2180, in relation to Article 2176, of the Civil
Code. Respondent alleged that petitioner is civilly liable because the latters employee driver,
Cabanilla, was reckless and negligent in driving the bus which collided with Catubigs motorcycle.
Petitioner, in its Answer with Counterclaim, contended that the proximate cause of the vehicular
collision, which resulted in the deaths of Catubig and Emperado, was the sole negligence of Catubig
when he imprudently overtook another vehicle at a curve and traversed the opposite lane of the
road. As a special and affirmative defense, petitioner asked for the dismissal of respondents
complaint for not being verified and/or for failure to state a cause of action, as there was no
allegation that petitioner was negligent in the selection or supervision of its employee driver.
In the Pre-Trial Order4 dated June 10, 1997, the parties stipulated that the primary issue for trial
was whether or not petitioner should be held liable for Catubigs death. Trial then ensued.
Police Officer (PO) 2 Robert B. Elnas (Elnas),5 Emilio Espiritu (Espiritu),6 Dr. Norberto Baldado, Jr.
(Dr. Baldado),7 Peter Cadimas (Cadimas),8 and respondent9 herself testified in support of
respondents complaint.
PO2 Elnas conducted an investigation of the collision incident. According to PO2 Elnas, the bus was
running fast, at a speed of 100 kilometers per hour, when it collided with the motorcycle which was

trying to overtake a truck. The collision occurred on the lane of the bus. Catubig was flung 21
meters away, and Emperado, 11 meters away, from the point of impact. The motorcycle was
totaled; the chassis broke into three parts, and the front wheel and the steering wheel with the
shock absorbers were found 26 meters and 38 meters, respectively, from the collision point. In
contrast, only the front bumper of the bus suffered damage.
Cadimas personally witnessed the collision of the bus and the motorcycle. He recalled that he was
then waiting for a ride to Dumaguete City and saw the Ceres Bulilit bus making a turn at a curve.
Cadimas signaled the said bus to halt but it was running fast. Cadimas also recollected that there
was a cargo truck running slow in the opposite direction of the bus. Cadimas next heard a thud and
saw that the bus already collided with a motorcycle.
Espiritu was the photographer who took photographs of the scene of the accident. He identified the
five photographs which he had taken of Catubig lying on the ground, bloodied; broken parts of the
motorcycle; and the truck which Catubig tried to overtake.
Dr. Baldado was the medico-legal doctor who conducted the post-mortem examination of Catubigs
body. He reported that Catubig suffered from the following injuries: laceration and fracture of the
right leg; laceration and fracture of the left elbow; multiple abrasions in the abdominal area, left
anterior chest wall, posterior right arm, and at the back of the left scapular area; and contusionhematoma just above the neck. Dr. Baldado confirmed that Catubig was already dead when the
latter was brought to the hospital, and that the vehicular accident could have caused Catubigs
instantaneous death.
Respondent herself testified to substantiate the amount of damages she was trying to recover from
petitioner for Catubigs death, such as Catubigs earning capacity; expenses incurred for the wake
and burial of Catubig, as well as of Emperado; the cost of the motorcycle; and the costs of the legal
services and fees respondent had incurred.
Respondents documentary exhibits consisted of her and Catubigs Marriage Contract dated August
21, 1982, their two childrens Certificate of Live Births, Catubigs College Diploma dated March 24,
1983, the list and receipts of the expenses for Catubigs burial, the sketch of the collision site
prepared by PO2 Elnas, the excerpts from the police blotter, the photographs of the collision,10 and
the Post Mortem Report11 on Catubigs cadaver prepared by Dr. Baldado.
In an Order12 dated October 6, 1998, the RTC admitted all of respondents aforementioned
evidence.
On the other hand, Rosie C. Amahit (Amahit)13 and Nunally Maypa (Maypa)14 took the witness stand
for petitioner.
Amahit was a Court Stenographer at the MCTC who took the transcript of stenographic notes (TSN)
in Criminal Case No. M-15-94 against Cabanilla. Amahit verified that the document being presented
by the defense in the present case was a true and correct copy of the TSN of the preliminary
investigation held in Criminal Case No. M-15-94 on May 25, 1994, and another document was a
duplicate original of the MCTC Resolution dated December 22, 1994 dismissing Criminal Case No.
M-15-94.
Maypa is the Administrative and Personnel Manager at the Dumaguete branch of petitioner. He
started working for petitioner on September 22, 1990 as a clerk at the Human Resources

Development Department at the Central Office of petitioner in Bacolod City. Sometime in November
1993, he became an Administrative Assistant at the Dumaguete branch of petitioner; and in August
1995, he was promoted to his current position at the same branch.
While he was still an Administrative Assistant, Maypa was responsible for the hiring of personnel
including drivers and conductors. Maypa explained that to be hired as a driver, an applicant should
be 35 to 45 years old, have at least five years experience in driving big trucks, submit police, court,
and medical clearances, and possess all the necessary requirements for driving a motor vehicle of
more than 4,500 kilograms in gross weight such as a professional drivers license with a restriction
code of 3. The applicant should also pass the initial interview, the actual driving and maintenance
skills tests, and a written psychological examination involving defensive driving techniques. Upon
passing these examinations, the applicant still had to go through a 15-day familiarization of the bus
and road conditions before being deployed for work. Maypa, however, admitted that at the time of
his appointment as Administrative Assistant at the Dumaguete branch, Cabanilla was already an
employee driver of petitioner.
Maypa further explained the investigation and grievance procedure followed by petitioner in cases
of vehicular accidents involving the latters employee drivers. Maypa related that Cabanilla had
been put on preventive suspension following the vehicular accident on January 27, 1994 involving
the bus Cabanilla was driving and the motorcycle carrying Catubig and Emperado. Following an
internal investigation of said accident conducted by petitioner, Cabanilla was declared not guilty of
causing the same, for he had not been negligent.
Lastly, Maypa recounted the expenses petitioner incurred as a result of the present litigation.
The documentary exhibits of petitioner consisted of the TSN of the preliminary investigation in
Criminal Case No. M-15-94 held on May 25, 1994 before the MCTC of Manjuyod-Bindoy-Ayungon of
the Province of Negros Oriental; Resolution dated December 22, 1994 of the MCTC in the same case;
and the Minutes dated February 17, 1994 of the Grievance Proceeding conducted by petitioner
involving Cabanilla.15
The RTC, in its Order16 dated November 12, 1999, admitted all the evidence presented by
petitioner.
On January 26, 2000, the RTC promulgated its Decision favoring petitioner. Based on the sketch
prepared by PO2 Elnas, which showed that "the point of impact x x x occurred beyond the center
lane near a curve within the lane of the Ceres bus[;]"17 plus, the testimonies of PO2 Elnas and
Cadimas that the motorcycle recklessly tried to overtake a truck near a curve and encroached the
opposite lane of the road, the RTC ruled that the proximate cause of the collision of the bus and
motorcycle was the negligence of the driver of the motorcycle, Catubig. The RTC, moreover, was
convinced through the testimony of Maypa, the Administrative and Personnel Manager of the
Dumaguete branch of petitioner, that petitioner had exercised due diligence in the selection and
supervision of its employee drivers, including Cabanilla.
After trial, the RTC concluded:
WHEREFORE, finding preponderance of evidence in favor of the [herein petitioner] that the [herein
respondents] husband is the reckless and negligent driver and not the driver of the [petitioner], the
above-entitled case is hereby ordered dismissed.

[Petitioners] counterclaim is also dismissed for lack of merit.18

Respondent appealed to the Court of Appeals. In its Decision dated November 17, 2005, the
appellate court held that both Catubig and Cabanilla were negligent in driving their respective
vehicles. Catubig, on one hand, failed to use reasonable care for his own safety and ignored the
hazard when he tried to overtake a truck at a curve. Cabanilla, on the other hand, was running his
vehicle at a high speed of 100 kilometers per hour. The Court of Appeals also brushed aside the
defense of petitioner that it exercised the degree of diligence exacted by law in the conduct of its
business. Maypa was not in a position to testify on the procedures followed by petitioner in hiring
Cabanilla as an employee driver considering that Cabanilla was hired a year before Maypa assumed
his post at the Dumaguete branch of petitioner.
Thus, the Court of Appeals decreed:
WHEREFORE, based on the foregoing, the assailed decision of the trial court is modified. We rule
that [herein petitioner] is equally liable for the accident in question which led to the deaths of
Quintin Catubig, Jr. and Teddy Emperado and hereby award to the heirs of Quintin Catubig, Jr. the
amount [of] P250,000.00 as full compensation for the death of the latter.19
The Court of Appeals denied the motion for reconsideration of petitioner in a Resolution dated
November 16, 2006.
Hence, the instant Petition for Review.
Petitioner asserts that respondents complaint for damages should be dismissed for the latters
failure to verify the same. The certification against forum shopping attached to the complaint,
signed by respondent, is not a valid substitute for respondents verification that she "has read the
pleading and that the allegations therein are true and correct of her personal knowledge or based
on authentic records."20 Petitioner cited jurisprudence in which the Court ruled that a pleading
lacking proper verification is treated as an unsigned pleading, which produces no legal effect under
Section 3, Rule 7 of the Rules of Court.
Petitioner also denies any vicarious or imputed liability under Article 2180, in relation to Article
2176, of the Civil Code. According to petitioner, respondent failed to prove the culpability of
Cabanilla, the employee driver of petitioner. There are already two trial court decisions (i.e., the
Resolution dated December 22, 1994 of the MCTC of Manjuyod-Bindoy-Ayungon of the Province of
Negros Oriental in Criminal Case No. M-15-94 and the Decision dated January 26, 2000 of the RTC
in the instant civil suit) explicitly ruling that the proximate cause of the collision was Catubigs
reckless and negligent act. Thus, without the fault or negligence of its employee driver, no liability
at all could be imputed upon petitioner.
Petitioner additionally argues, without conceding any fault or liability, that the award by the Court
of Appeals in respondents favor of the lump sum amount of P250,000.00 as total death indemnity
lacks factual and legal basis. Respondents evidence to prove actual or compensatory damages are
all self-serving, which are either inadmissible in evidence or devoid of probative value. The award
of moral and exemplary damages is likewise contrary to the ruling of the appellate court that
Catubig should be equally held liable for his own death.

Respondent maintains that the Court of Appeals correctly adjudged petitioner to be liable for
Catubigs death and that the appellate court had already duly passed upon all the issues raised in
the petition at bar.
The petition is meritorious.
At the outset, we find no procedural defect that would have warranted the outright dismissal of
respondents complaint.
Respondent filed her complaint for damages against petitioner on July 19, 1995, when the 1964
Rules of Court was still in effect. Rule 7, Section 6 of the 1964 Rules of Court provided:
Sec. 6. Verification.A pleading is verified only by an affidavit stating that the person verifying has
read the pleading and that the allegations thereof are true of his own knowledge.
Verifications based on "information and belief," or upon "knowledge, information and belief," shall
be deemed insufficient.
On July 1, 1997, the new rules on civil procedure took effect. The foregoing provision was carried
on, with a few amendments, as Rule 7, Section 4 of the 1997 Rules of Court, viz:
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 knowledge and belief.
A pleading required to be verified which contains a verification based on "information and belief,"
or upon "knowledge, information and belief," or lacks a proper verification, shall be treated as an
unsigned pleading."
The same provision was again amended by A.M. No. 00-2-10, which became effective on May 1,
2000. It now reads:
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.
A pleading required to be verified which contains a verification based on "information and belief"
or upon "knowledge, information and belief," or lacks a proper verification, shall be treated as an
unsigned pleading.
The 1997 Rules of Court, even prior to its amendment by A.M. No. 00-2-10, clearly provides that a
pleading lacking proper verification is to be treated as an unsigned pleading which produces no
legal effect. However, it also just as clearly states that "[e]xcept when otherwise specifically
required by law or rule, pleadings need not be under oath, verified or accompanied by affidavit." No
such law or rule specifically requires that respondents complaint for damages should have been
verified.
Although parties would often submit a joint verification and certificate against forum shopping, the
two are different.

In Pajuyo v. Court of Appeals,21 we already pointed out that:

A partys failure to sign the certification against forum shopping is different from the partys failure
to sign personally the verification. The certificate of non-forum shopping must be signed by the
party, and not by counsel. The certification of counsel renders the petition defective.
On the other hand, the requirement on verification of a pleading is a formal and not a jurisdictional
requisite. It is intended simply to secure an assurance that what are alleged 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. The party need not sign the verification. A partys representative, lawyer or
any person who personally knows the truth of the facts alleged in the pleading may sign the
verification.22
In the case before us, we stress that as a general rule, a pleading need not be verified, unless there is
a law or rule specifically requiring the same. Examples of pleadings that require verification are: (1)
all pleadings filed in civil cases under the 1991 Revised Rules on Summary Procedure; (2) petition
for review from the Regional Trial Court to the Supreme Court raising only questions of law under
Rule 41, Section 2; (3) petition for review of the decision of the Regional Trial Court to the Court of
Appeals under Rule 42, Section 1; (4) petition for review from quasi-judicial bodies to the Court of
Appeals under Rule 43, Section 5; (5) petition for review before the Supreme Court under Rule 45,
Section 1; (6) petition for annulment of judgments or final orders and resolutions under Rule 47,
Section 4; (7) complaint for injunction under Rule 58, Section 4; (8) application for preliminary
injunction or temporary restraining order under Rule 58, Section 4; (9) application for appointment
of a receiver under Rule 59, Section 1; (10) application for support pendente lite under Rule 61,
Section 1; (11) petition for certiorari against the judgments, final orders or resolutions of
constitutional commissions under Rule 64, Section 2; (12) petition for certiorari, prohibition, and
mandamus under Rule 65, Sections 1 to 3; (13) petition for quo warranto under Rule 66, Section 1;
(14) complaint for expropriation under Rule 67, Section 1; (15) petition for indirect contempt
under Rule 71, Section 4, all from the 1997 Rules of Court; (16) all complaints or petitions involving
intra-corporate controversies under the Interim Rules of Procedure on Intra-Corporate
Controversies; (17) complaint or petition for rehabilitation and suspension of payment under the
Interim Rules on Corporate Rehabilitation; and (18) petition for declaration of absolute nullity of
void marriages and annulment of voidable marriages as well as petition for summary proceedings
under the Family Code.
In contrast, all complaints, petitions, applications, and other initiatory pleadings must be
accompanied by a certificate against forum shopping, first prescribed by Administrative Circular
No. 04-94, which took effect on April 1, 1994, then later on by Rule 7, Section 5 of the 1997 Rules of
Court. It is not disputed herein that respondents complaint for damages was accompanied by such
a certificate.
In addition, verification, like in most cases required by the rules of procedure, is a formal, not
jurisdictional, requirement, and 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. When
circumstances warrant, 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.23

We agree with petitioner, nonetheless, that respondent was unable to prove imputable negligence
on the part of petitioner.
Prefatorily, we restate the time honored principle that in a petition for review under Rule 45, only
questions of law may be raised. It is not our function to analyze or weigh all over again evidence
already considered in the proceedings below, our jurisdiction is limited to reviewing only errors of
law that may have been committed by the lower court. The resolution of factual issues is the
function of lower courts, whose findings on these matters are received with respect. A question of
law which we may pass upon must not involve an examination of the probative value of the
evidence presented by the litigants.24
The above rule, however, admits of certain exceptions. The findings of fact of the Court of Appeals
are generally conclusive but may be reviewed when: (1) the factual findings of the Court of Appeals
and the trial court are contradictory; (2) the findings are grounded entirely on speculation,
surmises or conjectures; (3) the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd or impossible; (4) there is grave abuse of discretion in the appreciation
of facts; (5) the appellate court, in making its findings, goes beyond the issues of the case and such
findings are contrary to the admissions of both appellant and appellee; (6) the judgment of the
Court of Appeals is premised on a misapprehension of facts; (7) the Court of Appeals fails to notice
certain relevant facts which, if properly considered, will justify a different conclusion; and (8) the
findings of fact of the Court of Appeals are contrary to those of the trial court or are mere
conclusions without citation of specific evidence, or where the facts set forth by the petitioner are
not disputed by respondent, or where the findings of fact of the Court of Appeals are premised on
the absence of evidence but are contradicted by the evidence on record.25
The issue of negligence is basically factual.26 Evidently, in this case, the RTC and the Court of
Appeals have contradictory factual findings: the former found that Catubig alone was negligent,
while the latter adjudged that both Catubig and petitioner were negligent.
Respondent based her claim for damages on Article 2180, in relation to Article 2176, of the Civil
Code, which read:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this
Chapter.
Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or
omissions, but also for those persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.
xxxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.

There is merit in the argument of the petitioner that Article 2180 of the Civil Code imputing fault
or negligence on the part of the employer for the fault or negligence of its employee does not
apply to petitioner since the fault or negligence of its employee driver, Cabanilla, which would have
made the latter liable for quasi-delict under Article 2176 of the Civil Code, has never been
established by respondent. To the contrary, the totality of the evidence presented during trial
shows that the proximate cause of the collision of the bus and motorcycle is attributable solely to
the negligence of the driver of the motorcycle, Catubig.
Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury, and without which the result would not have
occurred. And more comprehensively, the proximate legal cause is that acting first and producing
the injury, either immediately or by setting other events in motion, all constituting a natural and
continuous chain of events, each having a close causal connection with its immediate predecessor,
the final event in the chain immediately effecting the injury as a natural and probable result of the
cause which first acted, under such circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might probably result therefrom.27
The RTC concisely articulated and aptly concluded that Catubigs overtaking of a slow-moving truck
ahead of him, while approaching a curve on the highway, was the immediate and proximate cause
of the collision which led to his own death, to wit:
Based on the evidence on record, it is crystal clear that the immediate and proximate cause of the
collision is the reckless and negligent act of Quintin Catubig, Jr. and not because the Ceres Bus was
running very fast. Even if the Ceres Bus is running very fast on its lane, it could not have caused the
collision if not for the fact that Quintin Catubig, Jr. tried to overtake a cargo truck and encroached
on the lane traversed by the Ceres Bus while approaching a curve. As the driver of the motorcycle,
Quintin Catubig, Jr. has not observed reasonable care and caution in driving his motorcycle which
an ordinary prudent driver would have done under the circumstances. Recklessness on the part of
Quintin Catubig, Jr. is evident when he tried to overtake a cargo truck while approaching a curve in
Barangay Donggo-an, Bolisong, Manjuyod, Negros Oriental. Overtaking is not allowed while
approaching a curve in the highway (Section 41(b), Republic Act [No.] 4136, as amended). Passing
another vehicle proceeding on the same direction should only be resorted to by a driver if the
highway is free from incoming vehicle to permit such overtaking to be made in safety (Section
41(a), Republic Act [No.] 4136). The collision happened because of the recklessness and
carelessness of [herein respondents] husband who was overtaking a cargo truck while
approaching a curve. Overtaking another vehicle while approaching a curve constitute reckless
driving penalized not only under Section 48 of Republic Act [No.] 4136 but also under Article 365 of
the Revised Penal Code.
The Court commiserate with the [respondent] for the untimely death of her
husband.1avvphi1 However, the Court as dispenser of justice has to apply the law based on the facts
of the case. Not having proved by preponderance of evidence that the proximate cause of the
collision is the negligence of the driver of the Ceres bus, this Court has no other option but to
dismiss this case.28 (Emphases supplied.)
The testimonies of prosecution witnesses Cadimas and PO2 Elnas that Cabanilla was driving the
bus at a reckless speed when the collision occurred lack probative value.

We are unable to establish the actual speed of the bus from Cadimass testimony for he merely
stated that the bus did not stop when he tried to flag it down because it was "running very fast."29
PO2 Elnas, on the other hand, made inconsistent statements as to the actual speed of the bus at the
time of the collision. During the preliminary investigation in Criminal Case No. M-15-94 before the
MCTC, PO2 Elnas refused to give testimony as to the speed of either the bus or the motorcycle at the
time of the collision and an opinion as to who was at fault.30 But during the trial of the present case
before the RTC, PO2 Elnas claimed that he was told by Cabanilla that the latter was driving the bus
at the speed of around 100 kilometers per hour.31
As the RTC noted, Cadimas and PO2 Elnas both pointed out that the motorcycle encroached the lane
of the bus when it tried to overtake, while nearing a curve, a truck ahead of it, consistent with the
fact that the point of impact actually happened within the lane traversed by the bus. It would be
more reasonable to assume then that it was Catubig who was driving his motorcycle at high speed
because to overtake the truck ahead of him, he necessarily had to drive faster than the truck.
Catubig should have also avoided overtaking the vehicle ahead of him as the curvature on the road
could have obstructed his vision of the oncoming vehicles from the opposite lane.
The evidence shows that the driver of the bus, Cabanilla, was driving his vehicle along the proper
lane, while the driver of the motorcycle, Catubig, had overtaken a vehicle ahead of him as he was
approaching a curvature on the road, in disregard of the provision of the law on reckless driving, at
the risk of his life and that of his employee, Emperado.
The presumption that employers are negligent under Article 2180 of the Civil Code flows from the
negligence of their employees.32 Having adjudged that the immediate and proximate cause of the
collision resulting in Catubigs death was his own negligence, and there was no fault or negligence
on Cabanillas part, then such presumption of fault or negligence on the part of petitioner, as
Cabanillas employer, does not even arise. Thus, it is not even necessary to delve into the defense of
petitioner that it exercised due diligence in the selection and supervision of Cabanilla as its
employee driver.
WHEREFORE, premises considered, the petition is GRANTED. The Decision dated November 17,
2005 and Resolution dated November 16, 2006 of the Court Appeals in CA-G.R. CV No. 66815 are
SET ASIDE and the Decision dated January 26, 2000 of the Regional Trial Court, Branch 30 of
Dumaguete City, dismissing Civil Case No. 11360 is REINSTATED.
SO ORDERED.

G.R. No. 154704

June 1, 2011

NELLIE VDA. DE FORMOSO and her children, namely, MA. THERESA FORMOSO-PESCADOR,
ROGER FORMOSO, MARY JANE FORMOSO, BERNARD FORMOSO and PRIMITIVO
MALCABA, Petitioners,
vs.

PHILIPPINE NATIONAL BANK, FRANCISCO ARCE, ATTY. BENJAMIN BARBERO, and ROBERTO
NAVARRO,Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition are the January 25, 2002 Resolution1 and the August 8, 2002 Resolution2 of
the Court of Appeals (CA) which dismissed the petition for certiorari filed by the petitioners on the
ground that the verification and certification of non-forum shopping was signed by only one of the
petitioners in CA G.R. SP No. 67183, entitled "Nellie P. Vda. De Formoso, et al. v. Philippine National
Bank, et al."
The Factual and
Procedural Antecedents
Records show that on October 14, 1989, Nellie Panelo Vda. De Formoso (Nellie) and her children
namely: Ma. Theresa Formoso-Pescador, Roger Formoso, Mary Jane Formoso, Bernard Formoso,
and Benjamin Formoso, executed a special power of attorney in favor of Primitivo Malcaba
(Malcaba) authorizing him, among others, to secure all papers and documents including the
owners copies of the titles of real properties pertaining to the loan with real estate mortgage
originally secured by Nellie and her late husband, Benjamin S. Formoso, from Philippine National
Bank, Vigan Branch (PNB) on September 4, 1980.
On April 20, 1990, the Formosos sold the subject mortgaged real properties to Malcaba through a
Deed of Absolute Sale. Subsequently, on March 22, 1994, Malcaba and his lawyer went to PNB to
fully pay the loan obligation including interests in the amount of 2,461,024.74.
PNB, however, allegedly refused to accept Malcabas tender of payment and to release the mortgage
or surrender the titles of the subject mortgaged real properties.
On March 24, 1994, the petitioners filed a Complaint for Specific Performance against PNB before
the Regional Trial Court of Vigan, Ilocos Sur (RTC) praying, among others, that PNB be ordered to
accept the amount of 2,461,024.74 as full settlement of the loan obligation of the Formosos.
After an exchange of several pleadings, the RTC finally rendered its decision3 on October 27, 1999
favoring the petitioners. The petitioners prayer for exemplary or corrective damages, attorneys
fees, and annual interest and daily interest, however, were denied for lack of evidence.
PNB filed a motion for reconsideration but it was denied for failure to comply with Rule 15, Section
5 of the 1997 Rules of Civil Procedure. PNB then filed a Notice of Appeal but it was dismissed for
being filed out of time.
The petitioners received their copy of the decision on November 26, 1999, and on January 25, 2001,
they filed their Petition for Relief from Judgment4 questioning the RTC decision that there was no
testimonial evidence presented to warrant the award for moral and exemplary damages. They
reasoned out that they could not then file a motion for reconsideration because they could not get
hold of a copy of the transcripts of stenographic notes. In its August 6, 2001 Order, the RTC denied
the petition for lack of merit.5

On September 7, 2001, the petitioners moved for reconsideration but it was denied by the RTC in
its Omnibus Order of September 26, 2001.6
Before the Court of Appeals
On November 29, 2001, the petitioners filed a petition for certiorari before the CA challenging the
RTC Order of August 6, 2001 and its Omnibus Order dated September 26, 2001.
In its January 25, 2002 Resolution, the CA dismissed the petition stating that:
The verification and certification of non-forum shopping was signed by only one (Mr. Primitivo
Macalba) of the many petitioners. In Loquias v. Office of the Ombudsman, G.R. No. 139396, August
15, 2000, it was ruled that all petitioners must be signatories to the certification of non-forum
shopping unless the one who signed it is authorized by the other petitioners. In the case at bar,
there was no showing that the one who signed was empowered to act for the rest. Therefore, it
cannot be presumed that the one who signed knew to the best of his knowledge whether his copetitioners had the same or similar claims or actions filed or pending. The ruling in Loquias further
declared that substantial compliance will not suffice in the matter involving strict observance of the
Rules. Likewise, the certification of non-forum shopping requires personal knowledge of the party
who executed the same and that petitioners must show reasonable cause for failure to personally
sign the certification. Utter disregard of the Rules cannot just be rationalized by harping on the
policy of liberal construction.
Aggrieved, after the denial of their motion for reconsideration, the petitioners filed this petition for
review anchored on the following
GROUNDS
THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT ALL THE PETITIONERS MUST SIGN
THE VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING IN A PETITION FOR
CERTIORARI WHEREIN ONLY QUESTIONS OF LAW ARE INVOLVED.
ALTERNATIVELY, THE COURT OF APPEALS PATENTLY ERRED IN DISMISSING THE WHOLE
PETITION WHEN AT THE VERY LEAST THE PETITION INSOFAR AS PETITIONER MALCABA IS
CONCERNED BEING THE SIGNATORY THEREOF SHOULD HAVE BEEN GIVEN DUE COURSE.
THE COURT OF APPEALS PATENTLY ERRED IN GIVING MORE WEIGHT ON TECHNICALITIES
WHEN THE PETITION BEFORE IT WAS CLEARLY MERITORIOUS.7
The petitioners basically argue that they have substantially complied with the requirements
provided under the 1997 Rules of Civil Procedure on Verification and Certification of Non-Forum
Shopping. The petitioners are of the view that the rule on Verification and Certification of NonForum Shopping that all petitioners must sign should be liberally construed, since only questions of
law are raised in a petition for certiorari and no factual issues that require personal knowledge of
the petitioners.
The petitioners further claim that they have a meritorious petition because contrary to the ruling of
the RTC, their Petition for Relief clearly showed that, based on the transcript of stenographic notes,
there was enough testimonial evidence for the RTC to grant them damages and attorneys fees as
prayed for.

On the other hand, PNB counters that the mandatory rule on the certification against forum
shopping requires that all of the six (6) petitioners must sign, namely: Nellie Vda. De Formoso and
her children Ma. Theresa Formoso-Pescador, Roger Formoso, Mary Jane Formoso, and Bernard
Formoso, and Primitivo Malcaba. Therefore, the signature alone of Malcaba on the certification is
insufficient.
PNB further argues that Malcaba was not even a party or signatory to the contract of loan entered
into by his co-petitioners. Neither was there evidence that Malcaba is a relative or a co-owner of the
subject properties. It likewise argues that, contrary to the stance of the petitioners, the issue raised
before the CA, as to whether or not the petitioners were entitled to moral and exemplary damages
as well as attorneys fees, is a factual one.
Finally, PNB asserts that the body of the complaint filed by the petitioners failed to show any
allegation that Macalba alone suffered damages for which he alone was entitled to reliefs as prayed
for. PNB claims that the wordings of the complaint were clear that all the petitioners were asking
for moral and exemplary damages and attorneys fees.
OUR RULING
The petition lacks merit.
Certiorari is an extraordinary, prerogative remedy and is never issued as a matter of right.
Accordingly, the party who seeks to avail of it must strictly observe the rules laid down by
law.8 Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:
SECTION 1. Petition for certiorari.- When any tribunal, board or officer exercising judicial or quasijudicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy,
and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of the judgment, order or resolution
subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn
certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46.
[Emphasis supplied]
Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil Procedure, as amended, petitions
for certiorari must be verified and accompanied by a sworn certification of non-forum shopping.
SECTION 3. Contents and filing of petition; effect of non-compliance with requirements. The petition
shall contain the full names and actual addresses of all the petitioners and respondents, a concise
statement of the matters involved, the factual background of the case, and the grounds relied upon
for the relief prayed for.
In actions filed under Rule 65, the petition shall further indicate the material dates showing when
notice of the judgment or final order or resolution subject thereof was received, when a motion for
new trial or reconsideration, if any, was filed and when notice of the denial thereof was received.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the
respondent with the original copy intended for the court indicated as such by the petitioner, and
shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment,
order, resolution, or ruling subject thereof, such material portions of the record as are referred to
therein, and other documents relevant or pertinent thereto. The certification shall be accomplished
by the proper clerk of court or his duly authorized representative, or by the proper officer of the
court, tribunal, agency or office involved or by his duly authorized representative. The other
requisite number of copies of the petition shall be accompanied by clearly legible plain copies of all
documents attached to the original.
The petitioner shall also submit together with the petition a sworn certification that he has
not theretofore commenced any other action involving the same issues in the Supreme Court, the
Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other
action or proceeding, he must state the status of the same; and if he should thereafter learn that a
similar action or proceeding has been filed or is pending before the Supreme Court, the Court of
Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to promptly
inform the aforesaid courts and other tribunal or agency thereof within five (5) days therefrom.
The petitioner shall pay the corresponding docket and other lawful fees to the clerk of court and
deposit the amount of P500.00 for costs at the time of the filing of the petition.
The failure of the petitioner to comply with any of the foregoing requirements shall be
sufficient ground for the dismissal of the petition. [Emphases supplied]
The acceptance of a petition for certiorari as well as the grant of due course thereto is, in general,
addressed to the sound discretion of the court. Although the Court has absolute discretion to reject
and dismiss a petition for certiorari, it does so only (1) when the petition fails to demonstrate grave
abuse of discretion by any court, agency, or branch of the government; or (2) when there are
procedural errors, like violations of the Rules of Court or Supreme Court
Circulars.9 [Emphasis supplied]
In the case at bench, the petitioners claim that the petition for certiorari that they filed before the
CA substantially complied with the requirements provided for under the 1997 Rules of Civil
Procedure on Verification and Certification of Non-Forum Shopping.
The Court disagrees.
Sections 4 and 5 of Rule 7 of the 1997 Rules of Civil Procedure provide:
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 pleadings and that the allegations
therein are true and correct of his personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based on "information and belief"
or upon "knowledge, information and belief" or lacks a proper verification, shall be treated as an
unsigned pleading.
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 quasijudicial 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 constitute 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. x x x.
In this regard, the case of Oldarico S. Traveno v. Bobongon Banana Growers Multi-Purpose
Cooperative,10 is enlightening:
Respecting the appellate courts dismissal of petitioners appeal due to the failure of some of them
to sign the therein accompanying verification and certification against forum-shopping, the Courts
guidelines for the bench and bar in Altres v. Empleo, which were culled "from jurisprudential
pronouncements," are instructive:
For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements already reflected above respecting non-compliance with the requirements on, or
submission of defective, verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on or submission of
defective verification, and non-compliance with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The Court may order its submission or correction or act on the pleading if
the attending circumstances are such that strict compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample knowledge to
swear to the truth of the allegations in the complaint or petition signs the verification, and when
matters alleged in the petition have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike
in verification, is generally not curable by its subsequent submission or correction thereof, unless
there is a need to relax the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a
case; otherwise, those who did not sign will be dropped as parties to the case. Under reasonable or
justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest

and invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-pleader, not by
his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he
must execute a Special Power of Attorney designating his counsel of record to sign on his behalf.
The petition for certiorari filed with the CA stated the following names as petitioners: Nellie Panelo
Vda. De Formoso, Ma. Theresa Formoso-Pescador, Roger Formoso, Mary Jane Formoso, Bernard
Formoso, Benjamin Formoso, and Primitivo Malcaba.
Admittedly, among the seven (7) petitioners mentioned, only Malcaba signed the verification and
certification of non-forum shopping in the subject petition. There was no proof that Malcaba was
authorized by his co-petitioners to sign for them. There was no special power of attorney shown by
the Formosos authorizing Malcaba as their attorney-in-fact in filing a petition for review on
certiorari. Neither could the petitioners give at least a reasonable explanation as to why only he
signed the verification and certification of non-forum shopping. In Athena Computers, Inc. and
Joselito R. Jimenez v. Wesnu A. Reyes, the Court explained that:
The verification of the petition and certification on non-forum shopping before the Court of Appeals
were signed only by Jimenez. There is no showing that he was authorized to sign the same by
Athena, his co-petitioner.
Section 4, Rule 7 of the Rules states that 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 knowledge and belief.
Consequently, the verification should have been signed not only by Jimenez but also by Athenas
duly authorized representative.
In Docena v. Lapesura, we ruled that the certificate of non-forum shopping should be signed by
all the petitioners or plaintiffs in a case, and that the signing by only one of them is
insufficient. The attestation on non-forum shopping requires personal knowledge by the
party executing the same, and the lone signing petitioner cannot be presumed to have
personal knowledge of the filing or non-filing by his co-petitioners of any action or claim the
same as similar to the current petition.
The certification against forum shopping in CA-G.R. SP No. 72284 is fatally defective, not
having been duly signed by both petitioners and thus warrants the dismissal of the petition
for certiorari. We have consistently held that the certification against forum shopping must be
signed by the principal parties. With respect to a corporation, the certification against forum
shopping may be signed for and on its behalf, by a specifically authorized lawyer who has personal
knowledge of the facts required to be disclosed in such document.
While the Rules of Court may be relaxed for persuasive and weighty reasons to relieve a litigant
from an injustice commensurate with his failure to comply with the prescribed procedures,
nevertheless they must be faithfully followed. In the instant case, petitioners have not shown any
reason which justifies relaxation of the Rules. We have held that procedural rules are not to be
belittled or dismissed simply because their non-observance may have prejudiced a partys
substantive rights. Like all rules, they are required to be followed except for the most persuasive of
reasons when they may be relaxed. Not one of these persuasive reasons is present here.

In fine, we hold that the Court of Appeals did not err in dismissing the petition for certiorari in view
of the procedural lapses committed by petitioners.11 [Emphases supplied]
Furthermore, the petitioners argue that the CA should not have dismissed the whole petition but
should have given it due course insofar as Malcaba is concerned because he signed the certification.
The petitioners also contend that the CA should have been liberal in the application of the Rules
because they have a meritorious case against PNB.
The Court, however, is not persuaded.
The petitioners were given a chance by the CA to comply with the Rules when they filed their
motion for reconsideration, but they refused to do so. Despite the opportunity given to them to
make all of them sign the verification and certification of non-forum shopping, they still failed to
comply. Thus, the CA was constrained to deny their motion and affirm the earlier resolution.12
Indeed, liberality and leniency were accorded in some cases.13 In these cases, however, those who
did not sign were relatives of the lone signatory, so unlike in this case, where Malcaba is not a
relative who is similarly situated with the other petitioners and who cannot speak for them. In the
case of Heirs of Domingo Hernandez, Sr. v. Plaridel Mingoa, Sr.,14 it was written:
In the instant case, petitioners share a common interest and defense inasmuch as they collectively
claim a right not to be dispossessed of the subject lot by virtue of their and their deceased parents
construction of a family home and occupation thereof for more than 10 years. The commonality of
their stance to defend their alleged right over the controverted lot thus gave petitioners xxx
authority to inform the Court of Appeals in behalf of the other petitioners that they have not
commenced any action or claim involving the same issues in another court or tribunal, and that
there is no other pending action or claim in another court or tribunal involving the same issues.
Here, all the petitioners are immediate relatives who share a common interest in the land
sought to be reconveyed and a common cause of action raising the same arguments in support
thereof. There was sufficient basis, therefore, for Domingo Hernandez, Jr. to speak for and in behalf
of his co-petitioners when he certified that they had not filed any action or claim in another court or
tribunal involving the same issues. Thus, the Verification/Certification that Hernandez, Jr. executed
constitutes substantial compliance under the Rules. [Emphasis supplied]
The same leniency was accorded to the petitioner in the case of Oldarico S. Traveno v. Bobongon
Banana Growers Multi-Purpose Cooperative,15 where it was stated:
The same leniency was applied by the Court in Cavile v. Heirs of Cavile, because the lone petitioner
who executed the certification of non-forum shopping was a relative and co-owner of the other
petitioners with whom he shares a common interest. x x x16
Considering the above circumstances, the Court does not see any similarity at all in the case at
bench to compel itself to relax the requirement of strict compliance with the rule regarding the
certification against forum shopping.
At any rate, the Court cannot accommodate the petitioners request to re-examine the testimony of
Malcaba in the transcript of stenographic notes of the April 25, 1999 hearing concerning his alleged
testimonial proof of damages for obvious reasons.

Primarily, Section 1, Rule 45 of the Rules of Court categorically states that the petition filed shall
raise only questions of law, which must be distinctly set forth. A question of law arises when there
is doubt as to what the law is on a certain state of facts, while there is a question of fact when the
doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same
must not involve an examination of the probative value of the evidence presented by the litigants or
any of them. The resolution of the issue must rest solely on what the law provides on the given set
of circumstances. Once it is clear that the issue invites a review of the evidence presented, the
question posed is one of fact.17
In this case, the petition clearly raises a factual issue.1avvphil As correctly argued by PNB, the
substantive issue of whether or not the petitioners are entitled to moral and exemplary damages as
well as attorneys fees is a factual issue which is beyond the province of a petition for review
on certiorari.
Secondly, even if the Court glosses over the technical defects, the petition for relief cannot be
granted. A perusal of the Petition for Relief of Judgment discloses that there is no fact constituting
fraud, accident, mistake or excusable negligence which are the grounds therefor. From the petition
itself, it appears that the petitioners counsel had a copy of the transcript of stenographic notes
which was in his cabinet all along and only discovered it when he was disposing old and terminated
cases.18 If he was only attentive to his records, he could have filed a motion for reconsideration or a
notice of appeal in behalf of the petitioners.
WHEREFORE, the petition is DENIED.