G.R. No.

69260 December 22, 1989

MUNICIPALITY OF BIAN, petitioner,
vs.
HON. JOSE MAR GARCIA, Judge of the Regional Trial Court at Bian, Laguna (BRANCH XXXIV, Region
IV), and ERLINDA FRANCISCO, r espondents.
The Provincial Fiscal for petitioner.
Roman M. Alonte for private respondent.

NARVASA, J.:
Three (3) questions are resolved in the action of certiorari at bar. The first is whether the special civil action of
eminent domain under Rule 67 of the Rules of Court is a case "wherein multiple appeals are allowed, 1 as regards
which 'the period of appeal shall be thirty [30] days, 2 instead of fifteen (15) days. 3 The second is whether or not the
Trial Court may treat the motion to dismiss" filed by one of the defendants in the action of eminent domain as a
"motion to dismiss" under Rule 16 of the Rules of Court, reverse the sequence of trial in order and hear and
determine said motion to dismiss, and thereafter dismiss the expropriation suit as against the movant. And the third
is whether or not a "locational clearance issued by the Human Settlements Regulatory Commission relative to use
of land is a bar to an expropriation suit involving that land.
The expropriation suit involved in this certiorari proceeding was commenced by complaint of the Municipality of
Bian, Laguna 4 filed in the Regional Trial Court of Laguna and City of San Pablo, presided over by respondent
Judge Jose Mar Garcia. The complaint named as defendants the owners of eleven (11) adjacent parcels of land in
Bian with an aggregate area of about eleven and a half (11-1/2) hectares. The land sought to be expropriated was
intended for use as the new site of a modern public market and the acquisition was authorized by a resolution of the
Sangguniang Bayan of Bian approved on April 11, 1983.
One of the defendants was Erlinda Francisco. She filed a "Motion to Dismiss" dated August 26, 1983, on the
following grounds; (a) the allegations of the complaint are vague and conjectural; (b) the complaint violates the
constitutional limitations of law and jurisprudence on eminent domain; (c) it is oppressive; (d) it is barred by prior
decision and disposition on the subject matter; and (e) it states no cause of action. 5 Now, her motion to dismiss"
was filed pursuant to Section 3, Rule 67 of the Rules of Court:
Sec. 3. Defenses and objections within the time specified in the summons, each defendant, in lieu of an answer,
shall present in a single motion to dismiss or for other apppropriate relief, all of his objections and defenses to the
right of the plaintiff to take his property for the use or purpose specified in the complaint. All such objections and
defenses not so presented are waived. A copy of the motion shall be served on the plaintiffs attorney of record and
filed with the court with the proof of service.
Her "motion to dismiss" was thus actually a pleading, taking the place of an answer in an ordinary civil action; 6 it
was not an ordinary motion governed by Rule 15, or a "motion to dismiss" within the contemplation of Rule 16 of the
Rules of Court.
On October 23, 1983, respondent Judge issued a writ of possession in favor of the plaintiff Municipality.
On February 3, 1984, Erlinda Francisco filed a "Motion for Separate Trial," invoking Section 2, Rule 31. 7 She
alleged that there had already been no little delay in bringing all the defendants within the court's jurisdiction, and
some of the defendants seemed "nonchalant or without special interest in the case" if not mere "free riders;" and
"while the cause of action and defenses are basically the same;" she had, among other defenses, "a constitutional
defense of vested right via a pre-existing approved Locational Clearance from the H.S.R.C." 8 Until this clearance
was revoked, Francisco contended, or the Municipality had submitted and obtained approval of a "rezoning of the
lots in question," it was premature for it to "file a case for expropriation. 9 The Court granted the motion. By Order
dated March 2, 1984, it directed that a separate trial be held for defendant Erlinda Francisco regarding her special
defenses mentioned in her .. Motion for Separate Trial and in her Motion to Dismiss, distinct from and separate from
the defenses commonly raised by all the defendants in their respective motions to dismiss."
At the separate trial, the Fiscal, in representation of the Municipality called the Trial Court's attention to the
irregularity of allowing Francisco to present her evidence ahead of the plaintiff, "putting the cart before the horse, as
it were." He argued that the motion to dismiss was in truth an answer, citing Rural Progress Administration v. Judge
de Guzman, and its filing did "not mean that the order of presentation of evidence will be reversed," but the usual
procedure should be followed; and the evidence adduced should be deemed "evidence only for the motion for

reconsideration of the writ of possession." 10
Nevertheless, at the hearing of March 5, and March 26, 1984, the Court directed Francisco to commence the
presentation of evidence. Francisco presented the testimony of Atty. Josue L. Jorvina, Jr. and certain exhibits the
Land Use Map of the Municipality of Bian, the Locational Clearance and Development Permit issued by the
H.S.R.C. in favor of "Erlinda Francisco c/o Ferlins Realty & Development Corporation, and Executive Order No. 648
and Letter of Instruction No. 729, etc. Thereafter, the respondent Judge issued an Order dated July 24, 1984
dismissing the complaint "as against defendant ERLINDA FRANCISCO," and amending the Writ of Possession
dated October 18, 1983 so as to "exclude therefrom and from its force and effects said defendant .. and her
property ..." His Honor found that-
1) a Locational Clearance had been issued on May 4,1983 by the Human Settlements Regulatory
Commission to the "Ferlin's Realty .. owned by defendant Erlinda Francisco to convert .. (her) lot to a commercial
complex;"
2) according to the testimony of Atty. Jorvina of the H.S.R.C., a grantee of a locational clearance acquires a
vested right over the subject property in the sense that .. said property may not be subject of an application for
locational clearance by another applicant while said locational clearance is subsisting;"
3) such a clearance should be "considered as a decision and disposition of private property co-equal with or in
parity with a disposition of private property through eminent domain;
4) the clearance was therefore "a legal bar against the right of plaintiff Municipality .. to expropriate the said
property."
The Municipality filed on August 17, 1984 a Motion for Reconsideration. Therein it (a) reiterated its contention
(b) decried the act of the Court in considering
respecting the irregularity of the reversal of the order of trial, supra. 11
the case submitted for decision after the presentation of evidence by Francisco without setting the case for further
hearing for the reception of the plaintiffs own proofs, (c) pointed out that as admitted by Atty. Jorvina, the locational
clearance did not "mean that other persons are already prevented from filing locational clearance for the same
project, and so could not be considered a bar to expropriation, (d) argued that the locational clearance issued on
May 4, 1983, became a "worthless sheet of paper" one year later, on May 4, 1984 in accordance with the explicit
condition in the clearance that it "shall be considered automatically revoked if not used within a period of one (1)
year from date of issue," the required municipal permits to put up the commercial complex never having been
obtained by Francisco; and (e) alleged that all legal requirements for the expropriation of the property had been duly
complied with by the Municipality. 12
The Municipality set its motion for reconsideration for hearing on August 28, 1984 after furnishing Francisco's
counsel with copy thereof The Court however re-scheduled the hearing more than two (2) months later, on
November 20, 1984. 13 Why the hearing was reset to such a remote date is not explained.
On September 13, 1984, Francisco filed an "Ex-Parte Motion for Execution and/or Finality of Order," contending
that the Order of July 27, 1984 had become "final and executory on August 12, 1984" for failure of the Municipality
to file a motion for reconsideration and/or appeal within the reglementary period," 14 i.e "fifteen (15) days counted

from the notice of the final order .. appealed from. 15
On October 10, 1984, the Court issued an Order declaring the Municipality's motion for reconsideration dated
August 15, 1984 to have been "filed out of time," on account of which the Court 49 could not give due course to
and/or act x x (thereon) except to dismiss (as it did thereby dismiss) the same." 16 It drew attention to the fact that
notice of its Order of July 24, 1984 (dismissing the complaint as against Francisco) was served on plaintiff
Municipality on July 27, 1984, but its motion for reconsideration was not presented until August 17, 1984, beyond
the fifteen-day period for appeal prescribed by law. And on October 15, 1985, His Honor promulgated another
 Order directing the issuance of (1) a writ of execution of the Order of July 24, 1984, and (2) a "certificate of finality"
of said order. 17
The Municipality attempted to have the respondent Court reconsider both and Orders of October 10, and October
15, 1984. To this end it submitted a motion contending that: 18
1) "multiple appeals are allowed by law" in actions of eminent domain, and hence the period of appeal is thirty
(30), not fifteen (15) days;
2) moreover, the grant of a separate trial at Francisco's instance had given rise "ipso facto to a situation where
multiple appeals became available (Sections 4 and 5, Rule 36, .. Santos v. Pecson, 79 Phil. 261);"
3) it was wrong for the Trial Court to have acted exparte on the motion for execution, the motion being
"litigable in character;" and
4) it (the Municipality) was denied due process when the Court, after receiving Francisco's evidence and
admitting her exhibits, immediately resolved the case on the merits as regards Francisco, without setting the case
"for further hearing for reception of evidence for the plaintiff."
The motion was denied, by Order dated October 18, 1984; hence, the special civil action of certiorari at bar.
The second phase of the eminent domain action is concerned with the determination by the Court of "the just
compensation for the property sought to be taken." This is done by the Court with the assistance of not more than
three (3) commissioners. 23 The order fixing the just compensation on the basis of the evidence before, and findings
of, the commissioners would be final, too. It would finally dispose of the second stage of the suit, and leave nothing
more to be done by the Court regarding the issue. Obviously, one or another of the parties may believe the order to
be erroneous in its appreciation of the evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied
party may seek reversal of the order by taking an appeal therefrom.
A similar two-phase feature is found in the special civil action of partition and accounting under Rule 69 of the Rules
of Court. 24
The second phase commences when it appears that "the parties are unable to agree upon the partition" directed by
the court. In that event partition shall be done for the parties by the Court with the assistance of not more than three
(3) commissioners. 30 This second stage may well also deal with the rendition of the accounting itself and its
approval by the Court after the parties have been accorded opportunity to be heard thereon, and an award for the
recovery by the party or parties thereto entitled of their just share in the rents and profits of the real estate in
question." 31 Such an order is, to be sure, final and appealable.
Now, this Court has settled the question of the finality and appealability of a decision or order decreeing partition or
recovery of property and/or accounting. In Miranda v. Court of Appeals, decided on June 18, 1986,32 the Court
resolved the question affirmatively, and expressly revoked the ruling in Zaldarriaga v. Enriquez 33 -that a decision or
order of partition is not final because it leaves something more to be done in the trial court for the complete
disposition of the case, i.e, the appointment of commissioners, the proceedings for the determination by said
commissioners of just compensation, the submission of their reports, and hearing thereon, and the approval of the
partition-and in Fuentebella vs. Carrascoso 34 -that a judgement for recovery of property with account is not final,
but merely interlocutory and hence not appealable until the accounting is made and passed upon. As pointed out in
Miranda, imperative considerations of public policy, of sound practice and adherence to the constitutional mandate
of simplified, just, speedy and inexpensive determination of every action require that judgments for recovery (or
partition) of property with accounting be considered as final judgments, duly appealable. This, notwithstanding that
further proceedings will still have to be rendered by the party required to do so, it will be ventilated and discussed by
the parties, and will eventually be passed upon by the Court. It is of course entirely possible that the Court
disposition may not sit well with either the party in whose favor the accounting is made, or the party rendering it. In
either case, the Court's adjudication on the accounting is without doubt a final one, for it would finally terminate the
proceedings thereon and leave nothing more to be done by the Court on the merits of the issue. And it goes without
saying that any party feeling aggrieved by that ultimate action of the Court on the accounting may seek reversal or
modification thereof by the Court of Appeals or the Supreme Court. 35
The Miranda doctrine was reiterated in de Guzman v. C.A.- 36 Valdez v. Bagaso; 37 Lagunzad v. Gonzales; 38
Cease v. C.A., Macadangdang v. C.A. and Hernandez v. C.A., Gabor v. C.A. 42
39 40 41
Fabrica v. C.A . 43

No reason presents itself for different disposition as regards cases of eminent domain. On the contrary, the close
analogy between the special actions of eminent domain and partition already pointed out, argues for the application
of the same rule to both proceedings.
The Court therefore holds that in actions of eminent domain, as in actions for partition, since no less than two (2)
appeals are allowed by law, the period for appeal from an order of condemnation 44 is thirty (30) days counted from
notice of order and not the ordinary period of fifteen (15) days prescribed for actions in general, conformably with
the provision of Section 39 of Batas Pambansa Bilang 129, in relation to paragraph 19 (b) of the Implementing
Rules to the effect that in "appeals in special proceedings in accordance with Rule 109 of the Rules of Court and
other cases wherein multiple appeals are allowed, the period of appeal shall be thirty (30) days, a record of appeal
being required. 45
The municipality's motion for reconsideration filed on August 17, 1984 was therefore timely presented, well within
the thirty-day period laid down by law therefor; and it was error for the Trial Court to have ruled otherwise and to
have declared that the order sought to be considered had become final and executory.
2. As already observed, the Municipality's complaint for expropriation impleaded eleven (11) defendants. A
separate trial was held on motion of one of them, Erlinda Francisco, 46 it appearing that she had asserted a defense
personal and peculiar to her, and inapplicable to the other defendants, supra. Subsequently, and on the basis of the
evidence presented by her, the Trial Court promulgated a separate Order dismissing the action as to her, in
accordance with Section 4, Rule 36 of the Rules of Court reading as follows:
Sec. 4. Several judgments in an action against several defendants, the court may, when a several judgment is
proper, render judgment against one or more of them, leaving the action to proceed against the others.
It is now claimed by the Municipality that the issuance of such a separate, final order or judgment had given rise
"ipso facto to a situation where multiple appeals became available." The Municipality is right.
In the case at bar, where a single complaint was filed against several defendants having individual, separate
interests, and a separate trial was held relative to one of said defendants after which a final order or judgment was
rendered on the merits of the plaintiff s claim against that particular defendant, it is obvious that in the event of an
appeal from that separate judgment, the original record cannot and should not be sent up to the appellate tribunal.
The record will have to stay with the trial court because it will still try the case as regards the other defendants. As
the rule above quoted settles, "In an action against several defendants, the court may, when a several judgment is
proper, render judgment against one or more of them, leaving the action to proceed against the others. " 47 In lieu of
the original record, a record on appeal will perforce have to be prepared and transmitted to the appellate court.
More than one appeal being permitted in this case, therefore, "the period of appeal shall be thirty (30) days, a
record of appeal being required as provided by the Implementing Rules in relation to Section 39 of B.P. Blg. 129,
supra. 48
3. Erlinda Francisco filed a "motion to dismiss" intraverse of the averments of the Municipality's complaint for
expropriation. That "motion to dismiss" was in fact the indicated responsive pleading to the complaint, "in lieu of an
answer." 49
Now, the Trial Court conducted a separate trial to determine whether or not, as alleged by Francisco in her "motion
to dismiss," she had a "vested right via a pre-existing approved Locational Clearance from the HRSC.," making the
expropriation suit premature. 50 While such a separate trial was not improper in the premises, 51 and was not put at
issue by the Municipality, the latter did protest against the Trial Court's (a) reversing the order of trial and receiving
first, the evidence of defendant Francisco, and (b) subsequently rendering its order sustaining Francisco's defense
and dismissing the action as to her, solely on the basis of said Francisco's evidence and without giving the plaintiff
an opportunity to present its own evidence on the issue. The Trial Court was clearly wrong on both counts. The
Court will have to sustain the Municipality on these points.
Nothing in the record reveals any valid cause to reverse the order of trial. What the Trial Court might have had in
mind was the provision of Section 5, Rule 16 of the Rules of Court allowing "any of the grounds for dismissal" in
Rule 16 to "be pleaded as an affirmative defense and authorizing the holding of a "preliminary hearing .. thereon as
if a motion to dismiss had been filed." Assuming this to be the fact, the reception of Francisco's evidence first was
wrong, because obviously, her asserted objection or defense that the locational clearance issued in her favor by the
HSRC was a legal bar to the expropriation suit was not a ground for dismissal under Rule 16. She evidently meant
to prove the Municipality's lack of cause of action; but lack of cause of action is not a ground for dismissal of an
action under Rule 16; the ground is the failure of the complaint to state a cause of action, which is obviously not the
same as plaintiff's not having a cause of action.
Nothing in the record, moreover, discloses any circumstances from which a waiver by the Municipality of the right to
present contrary proofs may be inferred. So, in deciding the issue without according the Municipality that right to
present contrary evidence, the Trial Court had effectively denied the Municipality due process and thus incurred in
another reversible error.
4. Turning now to the locational clearance issued by the HSRC in Francisco's favor on May 4, 1983, it seems
evident that said clearance did become a "worthless sheet of paper," as averred by the Municipality, upon the lapse
of one (1) year from said date in light of the explicit condition in the clearance that it 44 shall be considered
automatically revoked if not used within a period of one (1) year from date of issue," and the unrebutted fact that
Francisco had not really made use of it within that period. The failure of the Court to consider these facts, despite its
attention having been drawn to them, is yet another error which must be corrected.
WHEREFORE, the challenged Order issued by His Honor on July 24,1984 in Civil Case No. 8-1960 is ANNULLED
AND SET ASIDE, and the case is remanded to the Trial Court for the reception of the evidence of the plaintiff
Municipality of Bian as against defendant Erlinda Francisco, and for subsequent proceedings and judgment in
accordance with the Rules of Court and the law. Costs against private respondent.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
The first phase of a partition and/or accounting suit is taken up with the determination of whether or not a
co-ownership in fact exists, and a partition is proper (i.e., not otherwise legally prescribed) and may be made by
voluntary agreement of all the parties interested in the property. 25 This phase may end with a declaration that
plaintiff is not entitled to have a partition either because a co-ownership does not exist, or partition is legally
prohibited. 26 It may end, on the other hand, with an adjudgment that a co-ownership does in truth exist, partition is
proper in the premises and an accounting of rents and profits received by the defendant from the real estate in
question is in order. 27 In the latter case, "the parties may, ff they are able to agree, make partition among
themselves by proper instruments of conveyance, and the court shall confirm the partition so agreed upon. 28 , In
either case i.e. either the action is dismissed or partition and/or accounting is decreed the order is a final one, and
may be appealed by any party aggrieved thereby. 29
1. There are two (2) stages in every action of expropriation. The first is concerned with the determination of
the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context
It ends with an order, if not of dismissal of the action, "of condemnation declaring
of the facts involved in the suit. 19
that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose
described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of
the complaint." 20 An order of dismissal, if this be ordained, would be a final one, of course, since it finally disposes
of the action and leaves nothing more to be done by the Court on the Merits. 21 So, too, would an order of
condemnation be a final one, for thereafter, as the Rules expressly state, in the proceedings before the Trial Court,
"no objection to the exercise of the right of condemnation (or the propriety thereof) shall be flied or heard. 22
G.R. No. 89252 May 24, 1993
RAUL SESBREO, petitioner,
vs.
HON. COURT OF APPEALS, DELTA MOTORS CORPORATION AND PILIPINAS BANK, respondents.
Salva, Villanueva & Associates for Delta Motors Corporation.
Reyes, Salazar & Associates for Pilipinas Bank.

FELICIANO, J.:
On 9 February 1981, petitioner Raul Sesbreo made a money market placement in the amount of P300,000.00 with
the Philippine Underwriters Finance Corporation ("Philfinance"), Cebu Branch; the placement, with a term of
thirty-two (32) days, would mature on 13 March 1981, Philfinance, also on 9 February 1981, issued the following
documents to petitioner:
(a) the Certificate of Confirmation of Sale, "without recourse," No. 20496 of one (1) Delta Motors Corporation
Promissory Note ("DMC PN") No. 2731 for a term of 32 days at 17.0% per annum;
(b) the Certificate of securities Delivery Receipt No. 16587 indicating the sale of DMC PN No. 2731 to
petitioner, with the notation that the said security was in custodianship of Pilipinas Bank, as per Denominated
Custodian Receipt ("DCR") No. 10805 dated 9 February 1981; and
(c) post-dated checks payable on 13 March 1981 (i.e., the maturity date of petitioner's investment), with
petitioner as payee, Philfinance as drawer, and Insular Bank of Asia and America as drawee, in the total amount of
P304,533.33.
On 13 March 1981, petitioner sought to encash the postdated checks issued by Philfinance. However, the checks
were dishonored for having been drawn against insufficient funds.
On 26 March 1981, Philfinance delivered to petitioner the DCR No. 10805 issued by private respondent Pilipinas
Bank ("Pilipinas"). It reads as follows:
PILIPINAS BANK
Makati Stock Exchange Bldg.,
Ayala Avenue, Makati,
Metro Manila
February 9, 1981

VALUE DATE
TO Raul Sesbreo
April 6, 1981

MATURITY DATE
NO. 10805
DENOMINATED CUSTODIAN RECEIPT
This confirms that as a duly Custodian Bank, and upon instruction of PHILIPPINE UNDERWRITES FINANCE
CORPORATION, we have in our custody the following securities to you [sic] the extent herein indicated.
SERIAL MAT. FACE ISSUED REGISTERED AMOUNT
NUMBER DATE VALUE BY HOLDER PAYEE
2731 4-6-81 2,300,833.34 DMC PHIL. 307,933.33
UNDERWRITERS
FINANCE CORP.
We further certify that these securities may be inspected by you or your duly authorized representative at any time
during regular banking hours.
Upon your written instructions we shall undertake physical delivery of the above securities fully assigned to you
should this Denominated Custodianship Receipt remain outstanding in your favor thirty (30) days after its maturity.
PILIPINAS BANK
(By Elizabeth De Villa
Illegible Signature) 1
On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, Makati Branch, and
handed her a demand letter informing the bank that his placement with Philfinance in the amount reflected in the
DCR No. 10805 had remained unpaid and outstanding, and that he in effect was asking for the physical delivery of
the underlying promissory note. Petitioner then examined the original of the DMC PN No. 2731 and found: that the
security had been issued on 10 April 1980; that it would mature on 6 April 1981; that it had a face value of
P2,300,833.33, with the Philfinance as "payee" and private respondent Delta Motors Corporation ("Delta") as
"maker;" and that on face of the promissory note was stamped "NON NEGOTIABLE." Pilipinas did not deliver the
Note, nor any certificate of participation in respect thereof, to petitioner.
Petitioner later made similar demand letters, dated 3 July 1981 and 3 August 1981, 2 again asking private
respondent Pilipinas for physical delivery of the original of DMC PN No. 2731. Pilipinas allegedly referred all of
petitioner's demand letters to Philfinance for written instructions, as has been supposedly agreed upon in
"Securities Custodianship Agreement" between Pilipinas and Philfinance. Philfinance did not provide the
appropriate instructions; Pilipinas never released DMC PN No. 2731, nor any other instrument in respect thereof, to
petitioner.
Petitioner also made a written demand on 14 July 1981 3 upon private respondent Delta for the partial satisfaction of
DMC PN No. 2731, explaining that Philfinance, as payee thereof, had assigned to him said Note to the extent of
P307,933.33. Delta, however, denied any liability to petitioner on the promissory note, and explained in turn that it
had previously agreed with Philfinance to offset its DMC PN No. 2731 (along with DMC PN No. 2730) against
Philfinance PN No. 143-A issued in favor of Delta.
In the meantime, Philfinance, on 18 June 1981, was placed under the joint management of the Securities and
exchange commission ("SEC") and the Central Bank. Pilipinas delivered to the SEC DMC PN No. 2731, which to
date apparently remains in the custody of the SEC. 4
As petitioner had failed to collect his investment and interest thereon, he filed on 28 September 1982 an action for
damages with the Regional Trial Court ("RTC") of Cebu City, Branch 21, against private respondents Delta and
Pilipinas. 5 The trial court, in a decision dated 5 August 1987, dismissed the complaint and counterclaims for lack of
merit and for lack of cause of action, with costs against petitioner.
Petitioner appealed to respondent Court of Appeals in C.A.-G.R. CV No. 15195. In a Decision dated 21 March
1989, the Court of Appeals denied the appeal and held: 6
Be that as it may, from the evidence on record, if there is anyone that appears liable for the travails of
plaintiff-appellant, it is Philfinance. As correctly observed by the trial court:
This act of Philfinance in accepting the investment of plaintiff and charging it against DMC PN No. 2731 when its
entire face value was already obligated or earmarked for set-off or compensation is difficult to comprehend and may
have been motivated with bad faith. Philfinance, therefore, is solely and legally obligated to return the investment of
plaintiff, together with its earnings, and to answer all the damages plaintiff has suffered incident thereto.
Unfortunately for plaintiff, Philfinance was not impleaded as one of the defendants in this case at bar; hence, this
Court is without jurisdiction to pronounce judgement against it. (p. 11, Decision)
WHEREFORE, finding no reversible error in the decision appealed from, the same is hereby affirmed in toto. Cost
against plaintiff-appellant.
Petitioner moved for reconsideration of the above Decision, without success.
Hence, this Petition for Review on Certiorari.
After consideration of the allegations contained and issues raised in the pleadings, the Court resolved to give due
course to the petition and required the parties to file their respective memoranda. 7
Petitioner reiterates the assignment of errors he directed at the trial court decision, and contends that respondent
court of Appeals gravely erred: (i) in concluding that he cannot recover from private respondent Delta his assigned
portion of DMC PN No. 2731; (ii) in failing to hold private respondent Pilipinas solidarily liable on the DMC PN No.
2731 in view of the provisions stipulated in DCR No. 10805 issued in favor r of petitioner, and (iii) in refusing to
pierce the veil of corporate entity between Philfinance, and private respondents Delta and Pilipinas, considering that
the three (3) entities belong to the "Silverio Group of Companies" under the leadership of Mr. Ricardo Silverio, Sr. 8
There are at least two (2) sets of relationships which we need to address: firstly, the relationship of petitioner
vis-a-vis Delta; secondly, the relationship of petitioner in respect of Pilipinas. Actually, of course, there is a third
relationship that is of critical importance: the relationship of petitioner and Philfinance. However, since Philfinance
has not been impleaded in this case, neither the trial court nor the Court of Appeals acquired jurisdiction over the
person of Philfinance. It is, consequently, not necessary for present purposes to deal with this third relationship,
except to the extent it necessarily impinges upon or intersects the first and second relationships.
I.
We consider first the relationship between petitioner and Delta.
The Court of appeals in effect held that petitioner acquired no rights vis-a-vis Delta in respect of the Delta
promissory note (DMC PN No. 2731) which Philfinance sold "without recourse" to petitioner, to the extent of
P304,533.33. The Court of Appeals said on this point:
Nor could plaintiff-appellant have acquired any right over DMC PN No. 2731 as the same is "non-negotiable" as
stamped on its face (Exhibit "6"), negotiation being defined as the transfer of an instrument from one person to
another so as to constitute the transferee the holder of the instrument (Sec. 30, Negotiable Instruments Law). A
person not a holder cannot sue on the instrument in his own name and cannot demand or receive payment (Section
51, id.) 9
Petitioner admits that DMC PN No. 2731 was non-negotiable but contends that the Note had been validly
transferred, in part to him by assignment and that as a result of such transfer, Delta as debtor-maker of the Note,
was obligated to pay petitioner the portion of that Note assigned to him by the payee Philfinance.
Delta, however, disputes petitioner's contention and argues:
(1) that DMC PN No. 2731 was not intended to be negotiated or otherwise transferred by Philfinance as
manifested by the word "non-negotiable" stamp across the face of the Note 10 and because maker Delta and payee
Philfinance intended that this Note would be offset against the outstanding obligation of Philfinance represented by
Philfinance PN No. 143-A issued to Delta as payee;
(2) that the assignment of DMC PN No. 2731 by Philfinance was without Delta's consent, if not against its
instructions; and
(3) assuming (arguendo only) that the partial assignment in favor of petitioner was valid, petitioner took the
Note subject to the defenses available to Delta, in particular, the offsetting of DMC PN No. 2731 against Philfinance
PN No. 143-A. 11
We consider Delta's arguments seriatim.
Firstly, it is important to bear in mind that the negotiation of a negotiable instrument must be distinguished from the
assignment or transfer of an instrument whether that be negotiable or non-negotiable. Only an instrument qualifying
as a negotiable instrument under the relevant statute may be negotiated either by indorsement thereof coupled with
delivery, or by delivery alone where the negotiable instrument is in bearer form. A negotiable instrument may,
however, instead of being negotiated, also be assigned or transferred. The legal consequences of negotiation as
distinguished from assignment of a negotiable instrument are, of course, different. A non-negotiable instrument
may, obviously, not be negotiated; but it may be assigned or transferred, absent an express prohibition against
assignment or transfer written in the face of the instrument:
The words "not negotiable," stamped on the face of the bill of lading, did not destroy its assignability, but the sole
effect was to exempt the bill from the statutory provisions relative thereto, and a bill, though not negotiable, may be
transferred by assignment; the assignee taking subject to the equities between the original parties. 12 (Emphasis
added)
DMC PN No. 2731, while marked "non-negotiable," was not at the same time stamped "non-transferable" or
"non-assignable." It contained no stipulation which prohibited Philfinance from assigning or transferring, in whole or
in part, that Note.
Delta adduced the "Letter of Agreement" which it had entered into with Philfinance and which should be quoted in
full:
April 10, 1980
Philippine Underwriters Finance Corp.
Benavidez St., Makati,
Metro Manila.
Attention: Mr. Alfredo O. Banaria
SVP-Treasurer
GENTLEMEN:
This refers to our outstanding placement of P4,601,666.67 as evidenced by your Promissory Note No. 143-A, dated
April 10, 1980, to mature on April 6, 1981.
As agreed upon, we enclose our non-negotiable Promissory Note No. 2730 and 2731 for P2,000,000.00 each,
dated April 10, 1980, to be offsetted [sic] against your PN No. 143-A upon co-terminal maturity.
Please deliver the proceeds of our PNs to our representative, Mr. Eric Castillo.
Very Truly Yours,
(Sgd.)
Florencio B. Biagan
Senior Vice President 13
We find nothing in his "Letter of Agreement" which can be reasonably construed as a prohibition upon Philfinance
assigning or transferring all or part of DMC PN No. 2731, before the maturity thereof. It is scarcely necessary to add
that, even had this "Letter of Agreement" set forth an explicit prohibition of transfer upon Philfinance, such a
prohibition cannot be invoked against an assignee or transferee of the Note who parted with valuable consideration
in good faith and without notice of such prohibition. It is not disputed that petitioner was such an assignee or
transferee. Our conclusion on this point is reinforced by the fact that what Philfinance and Delta were doing by their
exchange of their promissory notes was this: Delta invested, by making a money market placement with
Philfinance, approximately P4,600,000.00 on 10 April 1980; but promptly, on the same day, borrowed back the bulk
of that placement, i.e., P4,000,000.00, by issuing its two (2) promissory notes: DMC PN No. 2730 and DMC PN No.
2731, both also dated 10 April 1980. Thus, Philfinance was left with not P4,600,000.00 but only P600,000.00 in
cash and the two (2) Delta promissory notes.
Apropos Delta's complaint that the partial assignment by Philfinance of DMC PN No. 2731 had been effected
without the consent of Delta, we note that such consent was not necessary for the validity and enforceability of the
assignment in favor of petitioner. 14 Delta's argument that Philfinance's sale or assignment of part of its rights to
DMC PN No. 2731 constituted conventional subrogation, which required its (Delta's) consent, is quite mistaken.
Conventional subrogation, which in the first place is never lightly inferred, 15 must be clearly established by the
unequivocal terms of the substituting obligation or by the evident incompatibility of the new and old obligations on
every point. 16 Nothing of the sort is present in the instant case.
It is in fact difficult to be impressed with Delta's complaint, since it released its DMC PN No. 2731 to Philfinance, an
entity engaged in the business of buying and selling debt instruments and other securities, and more generally, in
money market transactions. In Perez v. Court of Appeals, 17 the Court, speaking through Mme. Justice Herrera,
made the following important statement:
There is another aspect to this case. What is involved here is a money market transaction. As defined by Lawrence
Smith "the money market is a market dealing in standardized short-term credit instruments (involving large
amounts) where lenders and borrowers do not deal directly with each other but through a middle manor a dealer in
the open market." It involves "commercial papers" which are instruments "evidencing indebtness of any person or
entity. . ., which are issued, endorsed, sold or transferred or in any manner conveyed to another person or entity,
with or without recourse". The fundamental function of the money market device in its operation is to match and
bring together in a most impersonal manner both the "fund users" and the "fund suppliers." The money market is
an "impersonal market", free from personal considerations. "The market mechanism is intended to provide quick
mobility of money and securities."
The impersonal character of the money market device overlooks the individuals or entities concerned. The issuer of
a commercial paper in the money market necessarily knows in advance that it would be expenditiously
transacted and transferred to any investor/lender without need of notice to said issuer. In practice, no notification
is given to the borrower or issuer of commercial paper of the sale or transfer to the investor.
xxx xxx xxx
There is need to individuate a money market transaction, a relatively novel institution in the Philippine commercial
scene. It has been intended to facilitate the flow and acquisition of capital on an impersonal basis. And as
specifically required by Presidential Decree No. 678, the investing public must be given adequate and effective
protection in availing of the credit of a borrower in the commercial paper market.18 (Citations omitted; emphasis
supplied)
We turn to Delta's arguments concerning alleged compensation or offsetting between DMC PN No. 2731 and
Philfinance PN No. 143-A. It is important to note that at the time Philfinance sold part of its rights under DMC PN
No. 2731 to petitioner on 9 February 1981, no compensation had as yet taken place and indeed none could have
taken place. The essential requirements of compensation are listed in the Civil Code as follows:
Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of
the other;
(2) That both debts consists in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;
(3) That the two debts are due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor. (Emphasis supplied)
On 9 February 1981, neither DMC PN No. 2731 nor Philfinance PN No. 143-A was due. This was explicitly
recognized by Delta in its 10 April 1980 "Letter of Agreement" with Philfinance, where Delta acknowledged that the
relevant promissory notes were "to be offsetted (sic) against [Philfinance] PN No. 143-A upon co-terminal maturity."
As noted, the assignment to petitioner was made on 9 February 1981 or from forty-nine (49) days before the
"co-terminal maturity" date, that is to say, before any compensation had taken place. Further, the assignment to
petitioner would have prevented compensation had taken place between Philfinance and Delta, to the extent of
P304,533.33, because upon execution of the assignment in favor of petitioner, Philfinance and Delta would have
ceased to be creditors and debtors of each other in their own right to the extent of the amount assigned by
Philfinance to petitioner. Thus, we conclude that the assignment effected by Philfinance in favor of petitioner was a
valid one and that petitioner accordingly became owner of DMC PN No. 2731 to the extent of the portion thereof
assigned to him.
The record shows, however, that petitioner notified Delta of the fact of the assignment to him only on 14 July 1981,
19
that is, after the maturity not only of the money market placement made by petitioner but also of both DMC PN No.
2731 and Philfinance PN No. 143-A. In other words, petitioner notified Delta of his rights as assignee after
compensation had taken place by operation of law because the offsetting instruments had both reached maturity.
It is a firmly settled doctrine that the rights of an assignee are not any greater that the rights of the assignor, since
the assignee is merely substituted in the place of the assignor 20 and that the assignee acquires his rights subject to
the equities i.e., the defenses which the debtor could have set up against the original assignor before notice of
the assignment was given to the debtor. Article 1285 of the Civil Code provides that:
Art. 1285. The debtor who has consented to the assignment of rights made by a creditor in favor of a third
person, cannot set up against the assignee the compensation which would pertain to him against the assignor,
unless the assignor was notified by the debtor at the time he gave his consent, that he reserved his right to the
compensation.
If the creditor communicated the cession to him but the debtor did not consent thereto, the latter may set up the
compensation of debts previous to the cession, but not of subsequent ones.
If the assignment is made without the knowledge of the debtor, he may set up the compensation of all credits
prior to the same and also later ones until he had knowledge of the assignment. (Emphasis supplied)
Article 1626 of the same code states that: "the debtor who, before having knowledge of the assignment, pays his
creditor shall be released from the obligation." In Sison v. Yap-Tico, 21 the Court explained that:
[n]o man is bound to remain a debtor; he may pay to him with whom he contacted to pay; and if he pay before
notice that his debt has been assigned, the law holds him exonerated, for the reason that it is the duty of the person
who has acquired a title by transfer to demand payment of the debt, to give his debt or notice. 22
At the time that Delta was first put to notice of the assignment in petitioner's favor on 14 July 1981, DMC PN No.
2731 had already been discharged by compensation. Since the assignor Philfinance could not have then compelled
payment anew by Delta of DMC PN No. 2731, petitioner, as assignee of Philfinance, is similarly disabled from
collecting from Delta the portion of the Note assigned to him.
It bears some emphasis that petitioner could have notified Delta of the assignment or sale was effected on 9
February 1981. He could have notified Delta as soon as his money market placement matured on 13 March 1981
without payment thereof being made by Philfinance; at that time, compensation had yet to set in and discharge
DMC PN No. 2731. Again petitioner could have notified Delta on 26 March 1981 when petitioner received from
Philfinance the Denominated Custodianship Receipt ("DCR") No. 10805 issued by private respondent Pilipinas in
favor of petitioner. Petitioner could, in fine, have notified Delta at any time before the maturity date of DMC PN No.
2731. Because petitioner failed to do so, and because the record is bare of any indication that Philfinance had itself
notified Delta of the assignment to petitioner, the Court is compelled to uphold the defense of compensation raised
by private respondent Delta. Of course, Philfinance remains liable to petitioner under the terms of the assignment
made by Philfinance to petitioner.
II.
We turn now to the relationship between petitioner and private respondent Pilipinas. Petitioner contends that
Pilipinas became solidarily liable with Philfinance and Delta when Pilipinas issued DCR No. 10805 with the following
words:
Upon your written instruction, we [Pilipinas] shall undertake physical delivery of the above securities fully assigned
to you . 23
The Court is not persuaded. We find nothing in the DCR that establishes an obligation on the part of Pilipinas to pay
petitioner the amount of P307,933.33 nor any assumption of liability in solidum with Philfinance and Delta under
DMC PN No. 2731. We read the DCR as a confirmation on the part of Pilipinas that:
(1) it has in its custody, as duly constituted custodian bank, DMC PN No. 2731 of a certain face value, to
mature on 6 April 1981 and payable to the order of Philfinance;
(2) Pilipinas was, from and after said date of the assignment by Philfinance to petitioner (9 February 1981),
holding that Note on behalf and for the benefit of petitioner, at least to the extent it had been assigned to
petitioner by payee Philfinance; 24
(3) petitioner may inspect the Note either "personally or by authorized representative", at any time during
regular bank hours; and
(4) upon written instructions of petitioner, Pilipinas would physically deliver the DMC PN No. 2731 (or a
participation therein to the extent of P307,933.33) "should this Denominated Custodianship receipt remain
outstanding in [petitioner's] favor thirty (30) days after its maturity."
Thus, we find nothing written in printers ink on the DCR which could reasonably be read as converting Pilipinas into
an obligor under the terms of DMC PN No. 2731 assigned to petitioner, either upon maturity thereof or any other
time. We note that both in his complaint and in his testimony before the trial court, petitioner referred merely to the
obligation of private respondent Pilipinas to effect the physical delivery to him of DMC PN No. 2731. 25 Accordingly,
petitioner's theory that Pilipinas had assumed a solidary obligation to pay the amount represented by a portion of
the Note assigned to him by Philfinance, appears to be a new theory constructed only after the trial court had ruled
against him. The solidary liability that petitioner seeks to impute Pilipinas cannot, however, be lightly inferred. Under
article 1207 of the Civil Code, "there is a solidary liability only when the law or the nature of the obligation requires
solidarity," The record here exhibits no express assumption of solidary liability vis-a-vis petitioner, on the part of
Pilipinas. Petitioner has not pointed to us to any law which imposed such liability upon Pilipinas nor has petitioner
argued that the very nature of the custodianship assumed by private respondent Pilipinas necessarily implies
solidary liability under the securities, custody of which was taken by Pilipinas. Accordingly, we are unable to hold
Pilipinas solidarily liable with Philfinance and private respondent Delta under DMC PN No. 2731.
We do not, however, mean to suggest that Pilipinas has no responsibility and liability in respect of petitioner under
the terms of the DCR. To the contrary, we find, after prolonged analysis and deliberation, that private respondent
Pilipinas had breached its undertaking under the DCR to petitioner Sesbreo.
We believe and so hold that a contract of deposit was constituted by the act of Philfinance in designating Pilipinas
as custodian or depositary bank. The depositor was initially Philfinance; the obligation of the depository was owed,
however, to petitioner Sesbreo as beneficiary of the custodianship or depository agreement. We do not consider
that this is a simple case of a stipulation pour autri. The custodianship or depositary agreement was established as
an integral part of the money market transaction entered into by petitioner with Philfinance. Petitioner bought a
portion of DMC PN No. 2731; Philfinance as assignor-vendor deposited that Note with Pilipinas in order that the
thing sold would be placed outside the control of the vendor. Indeed, the constituting of the depositary or
custodianship agreement was equivalent to constructive delivery of the Note (to the extent it had been sold or
assigned to petitioner) to petitioner. It will be seen that custodianship agreements are designed to facilitate
transactions in the money market by providing a basis for confidence on the part of the investors or placers that the
instruments bought by them are effectively taken out of the pocket, as it were, of the vendors and placed safely
beyond their reach, that those instruments will be there available to the placers of funds should they have need of
them. The depositary in a contract of deposit is obliged to return the security or the thing deposited upon demand of
the depositor (or, in the presented case, of the beneficiary) of the contract, even though a term for such return may
have been established in the said contract. 26 Accordingly, any stipulation in the contract of deposit or custodianship
that runs counter to the fundamental purpose of that agreement or which was not brought to the notice of and
accepted by the placer-beneficiary, cannot be enforced as against such beneficiary-placer.
We believe that the position taken above is supported by considerations of public policy. If there is any party that
needs the equalizing protection of the law in money market transactions, it is the members of the general public
whom place their savings in such market for the purpose of generating interest revenues. 27 The custodian bank, if it
is not related either in terms of equity ownership or management control to the borrower of the funds, or the
commercial paper dealer, is normally a preferred or traditional banker of such borrower or dealer (here,
Philfinance). The custodian bank would have every incentive to protect the interest of its client the borrower or
dealer as against the placer of funds. The providers of such funds must be safeguarded from the impact of
stipulations privately made between the borrowers or dealers and the custodian banks, and disclosed to
fund-providers only after trouble has erupted.
In the case at bar, the custodian-depositary bank Pilipinas refused to deliver the security deposited with it when
petitioner first demanded physical delivery thereof on 2 April 1981. We must again note, in this connection, that on 2
April 1981, DMC PN No. 2731 had not yet matured and therefore, compensation or offsetting against Philfinance
PN No. 143-A had not yet taken place. Instead of complying with the demand of the petitioner, Pilipinas purported
to require and await the instructions of Philfinance, in obvious contravention of its undertaking under the DCR to
effect physical delivery of the Note upon receipt of "written instructions" from petitioner Sesbreo. The ostensible
term written into the DCR (i.e., "should this [DCR] remain outstanding in your favor thirty [30] days after its
maturity") was not a defense against petitioner's demand for physical surrender of the Note on at least three
grounds: firstly, such term was never brought to the attention of petitioner Sesbreo at the time the money market
placement with Philfinance was made; secondly, such term runs counter to the very purpose of the custodianship or
depositary agreement as an integral part of a money market transaction; and thirdly, it is inconsistent with the
provisions of Article 1988 of the Civil Code noted above. Indeed, in principle, petitioner became entitled to demand
physical delivery of the Note held by Pilipinas as soon as petitioner's money market placement matured on 13
March 1981 without payment from Philfinance.
We conclude, therefore, that private respondent Pilipinas must respond to petitioner for damages sustained by
arising out of its breach of duty. By failing to deliver the Note to the petitioner as depositor-beneficiary of the thing
deposited, Pilipinas effectively and unlawfully deprived petitioner of the Note deposited with it. Whether or not
Pilipinas itself benefitted from such conversion or unlawful deprivation inflicted upon petitioner, is of no moment for
present purposes. Prima facie, the damages suffered by petitioner consisted of P304,533.33, the portion of the
DMC PN No. 2731 assigned to petitioner but lost by him by reason of discharge of the Note by compensation, plus
legal interest of six percent (6%) per annum containing from 14 March 1981.
The conclusion we have reached is, of course, without prejudice to such right of reimbursement as Pilipinas may
have vis-a-vis Philfinance.
III.
The third principal contention of petitioner that Philfinance and private respondents Delta and Pilipinas should be
treated as one corporate entity need not detain us for long.
In the first place, as already noted, jurisdiction over the person of Philfinance was never acquired either by the trial
court nor by the respondent Court of Appeals. Petitioner similarly did not seek to implead Philfinance in the Petition
before us.
Secondly, it is not disputed that Philfinance and private respondents Delta and Pilipinas have been organized as
separate corporate entities. Petitioner asks us to pierce their separate corporate entities, but has been able only to
cite the presence of a common Director Mr. Ricardo Silverio, Sr., sitting on the Board of Directors of all three (3)
companies. Petitioner has neither alleged nor proved that one or another of the three (3) concededly related
companies used the other two (2) as mere alter egos or that the corporate affairs of the other two (2) were
administered and managed for the benefit of one. There is simply not enough evidence of record to justify
disregarding the separate corporate personalities of delta and Pilipinas and to hold them liable for any assumed or
undetermined liability of Philfinance to petitioner. 28
WHEREFORE, for all the foregoing, the Decision and Resolution of the Court of Appeals in C.A.-G.R. CV No.
15195 dated 21 march 1989 and 17 July 1989, respectively, are hereby MODIFIED and SET ASIDE, to the extent
that such Decision and Resolution had dismissed petitioner's complaint against Pilipinas Bank. Private respondent
Pilipinas bank is hereby ORDERED to indemnify petitioner for damages in the amount of P304,533.33, plus legal
interest thereon at the rate of six percent (6%) per annum counted from 2 April 1981. As so modified, the Decision
and Resolution of the Court of Appeals are hereby AFFIRMED. No pronouncement as to costs.
EN BANC
[G.R. No. 130866. September 16, 1998]
ST. MARTIN FUNERAL HOME, petitioner, vs. NATIONAL LABOR RELATIONS MARTINEZ, COMMISSION
and BIENVENIDO ARICAYOS, r espondents.
DECISION
REGALADO, J.:
The present petition for certiorari stemmed from a complaint for illegal dismissal filed by herein private respondent
before the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. III, in San Fernando,
Pampanga. Private respondent alleges that he started working as Operations Manager of petitioner St. Martin
Funeral Home on February 6, 1995. However, there was no contract of employment executed between him and
petitioner nor was his name included in the semi-monthly payroll. On January 22, 1996, he was dismissed from his
employment for allegedly misappropriating P38,000.00 which was intended for payment by petitioner of its value
added tax (VAT) to the Bureau of Internal Revenue (BIR).[1]
Petitioner on the other hand claims that private respondent was not its employee but only the uncle of Amelita
Malabed, the owner of petitioner St. Martins Funeral Home. Sometime in 1995, private respondent, who was
formerly working as an overseas contract worker, asked for financial assistance from the mother of Amelita. Since
then, as an indication of gratitude, private respondent voluntarily helped the mother of Amelita in overseeing the
business.
In January 1996, the mother of Amelita passed away, so the latter she took over the management of the business.
She then discovered that there were arrears in the payment of taxes and other government fees, although the
records purported to show that the same were already paid. Amelita then made some changes in the business
operation and private respondent and his wife were no longer allowed to participate in the management thereof. As
a consequence, the latter filed a complaint charging that petitioner had illegally terminated his employment.[2]
Based on the position papers of the parties, the labor arbiter rendered a decision in favor of petitioner on October
25, 1996 declaring that no employer-employee relationship existed between the parties and, therefore, his office
had no jurisdiction over the case.[3]
Not satisfied with the said decision, private respondent appealed to the NLRC contending that the labor arbiter
erred (1) in not giving credence to the evidence submitted by him; (2) in holding that he worked as a volunteer and
not as an employee of St. Martin Funeral Home from February 6, 1995 to January 23, 1996, or a period of about
one year; and (3) in ruling that there was no employer-employee relationship between him and petitioner.[4]
On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision and remanding the case
to the labor arbiter for immediate appropriate proceedings.[5] Petitioner then filed a motion for reconsideration which
was denied by the NLRC in its resolution dated August 18, 1997 for lack of merit,[6] hence the present petition
alleging that the NLRC committed grave abuse of discretion.[7]
Before proceeding further into the merits of the case at bar, the Court feels that it is now exigent and opportune to
reexamine the functional validity and systemic practicability of the mode of judicial review it has long adopted and
still follows with respect to decisions of the NLRC. The increasing number of labor disputes that find their way to this
Court and the legislative changes introduced over the years into the provisions of Presidential Decree (P.D.) No.
442 (The Labor Code of the Philippines and Batas Pambansa Blg. (B.P. No.) 129 (The Judiciary Reorganization
Act of 1980) now stridently call for and warrant a reassessment of that procedural aspect.
We prefatorily delve into the legal history of the NLRC. It was first established in the Department of Labor by P.D.
No. 21 on October 14, 1972, and its decisions were expressly declared to be appealable to the Secretary of Labor
and, ultimately, to the President of the Philippines.
On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the same to take effect six months after
its promulgation.[8] Created and regulated therein is the present NLRC which was attached to the Department of
Labor and Employment for program and policy coordination only.[9] Initially, Article 302 (now, Article 223) thereof
also granted an aggrieved party the remedy of appeal from the decision of the NLRC to the Secretary of Labor, but
P.D. No. 1391 subsequently amended said provision and abolished such appeals. No appellate review has since
then been provided for.
Thus, to repeat, under the present state of the law, there is no provision for appeals from the decision of the
NLRC.[10] The present Section 223, as last amended by Section 12 of R.A. No. 6715, instead merely provides that
the Commission shall decide all cases within twenty days from receipt of the answer of the appellee, and that such
decision shall be final and executory after ten calendar days from receipt thereof by the parties.
When the issue was raised in an early case on the argument that this Court has no jurisdiction to review the
decisions of the NLRC, and formerly of the Secretary of Labor, since there is no legal provision for appellate review
thereof, the Court nevertheless rejected that thesis. It held that there is an underlying power of the courts to
scrutinize the acts of such agencies on questions of law and jurisdiction even though no right of review is given by
statute; that the purpose of judicial review is to keep the administrative agency within its jurisdiction and protect the
substantial rights of the parties; and that it is that part of the checks and balances which restricts the separation of
powers and forestalls arbitrary and unjust adjudications.[11]
Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the remedy of the aggrieved
party is to timely file a motion for reconsideration as a precondition for any further or subsequent remedy,[12] and
then seasonably avail of the special civil action of certiorari under Rule 65,[13] for which said Rule has now fixed the
reglementary period of sixty days from notice of the decision. Curiously, although the 10-day period for finality of the
decision of the NLRC may already have lapsed as contemplated in Section 223 of the Labor Code, it has been held
that this Court may still take cognizance of the petition for certiorari on jurisdictional and due process considerations

if filed within the reglementary period under Rule 65.[14]
Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129 originally provided as follows:
SEC. 9. Jurisdiction. - The Intermediate Appellate Court shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;
(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; and
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or awards of Regional
Trial Courts and quasi-judicial agencies, instrumentalities, boards, or commissions, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary
Act of 1948.
The Intermediate Appellate Court shall have the power to try cases and conduct hearings, receive evidence and
perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate
jurisdiction, including the power to grant and conduct new trials or further proceedings.
These provisions shall not apply to decisions and interlocutory orders issued under the Labor Code of the
Philippines and by the Central Board of Assessment Appeals.[15]
Subsequently, and as it presently reads, this provision was amended by R.A. No. 7902 effective March 18, 1995, to
wit:
SEC. 9. Jurisdiction. - The Court of Appeals shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;
(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; and
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional
Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and
Exchange Commission, the Social Security Commission, the Employees Compensation Commission and the Civil
Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with
the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions
of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section
17 of the Judiciary Act of 1948.
The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any
and all acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further proceedings. Trials or hearings in the Court of
Appeals must be continuous and must be completed within, three (3) months, unless extended by the Chief Justice.
It will readily be observed that, aside from the change in the name of the lower appellate court,[16] the following
amendments of the original provisions of Section 9 of B.P. No. 129 were effected by R.A. No. 7902, viz.:
1. The last paragraph which excluded its application to the Labor Code of the Philippines and the Central Board of
Assessment Appeals was deleted and replaced by a new paragraph granting the Court of Appeals limited powers to
conduct trials and hearings in cases within its jurisdiction.
2. The reference to the Labor Code in that last paragraph was transposed to paragraph (3) of the section, such that
the original exclusionary clause therein now provides except those falling within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree
No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph
(4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Italics supplied)
3. Contrarily, however, specifically added to and included among the quasi-judicial agencies over which the Court of
Appeals shall have exclusive appellate jurisdiction are the Securities and Exchange Commission, the Social
Security Commission, the Employees Compensation Commission and the Civil Service Commission.
This, then, brings us to a somewhat perplexing impass, both in point of purpose and terminology. As earlier
explained, our mode of judicial review over decisions of the NLRC has for some time now been understood to be by
a petition for certiorari under Rule 65 of the Rules of Court. This is, of course, a special original action limited to the
resolution of jurisdictional issues, that is, lack or excess of jurisdiction and, in almost all cases that have been
brought to us, grave abuse of discretion amounting to lack of jurisdiction.
It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now grants exclusive appellate jurisdiction to
the Court of Appeals over all final adjudications of the Regional Trial Courts and the quasi-judicial agencies
generally or specifically referred to therein except, among others, those falling within the appellate jurisdiction of the
Supreme Court in accordance with x x x the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, x x x. This would necessarily contradict what has been ruled and said all along that appeal does not lie
from decisions of the NLRC.[17] Yet, under such excepting clause literally construed, the appeal from the NLRC
cannot be brought to the Court of Appeals, but to this Court by necessary implication.
The same exceptive clause further confuses the situation by declaring that the Court of Appeals has no appellate
jurisdiction over decisions falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the provisions of B.P. No. 129, and those specified cases in Section 17 of the Judiciary Act of 1948.
These cases can, of course, be properly excluded from the exclusive appellate jurisdiction of the Court of Appeals.
However, because of the aforementioned amendment by transposition, also supposedly excluded are cases falling
within the appellate jurisdiction of the Supreme Court in accordance with the Labor Code. This is illogical and
impracticable, and Congress could not have intended that procedural gaffe, since there are no cases in the Labor
Code the decisions, resolutions, orders or awards wherein are within the appellate jurisdiction of the Supreme
Court or of any other court for that matter.
A review of the legislative records on the antecedents of R.A. No. 7902 persuades us that there may have been an
oversight in the course of the deliberations on the said Act or an imprecision in the terminology used therein. In fine,
Congress did intend to provide for judicial review of the adjudications of the NLRC in labor cases by the Supreme
Court, but there was an inaccuracy in the term used for the intended mode of review. This conclusion which we
have reluctantly but prudently arrived at has been drawn from the considerations extant in the records of Congress,
more particularly on Senate Bill No. 1495 and the Reference Committee Report on S. No. 1495/H. No. 10452.[18]
In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his sponsorship speech[19] from which we
reproduce the following excerpts:
The Judiciary Reorganization Act, Mr. President, Batas Pambansa Blg. 129, reorganized the Court of
Appeals and at the same time expanded its jurisdiction and powers. Among others, its appellate
jurisdiction was expanded to cover not only final judgment of Regional Trial Courts, but also all final
judgment(s), decisions, resolutions, orders or awards of quasi-judicial agencies, instrumentalities, boards
and commissions, except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the provisions of BP Blg. 129 and of subparagraph 1 of the third
paragraph and subparagraph 4 of Section 17 of the Judiciary Act of 1948.
Mr. President, the purpose of the law is to ease the workload of the Supreme Court by the transfer of
some of its burden of review of factual issues to the Court of Appeals. However, whatever benefits that
can be derived from the expansion of the appellate jurisdiction of the Court of Appeals was cut short by
the last paragraph of Section 9 of Batas Pambansa Blg. 129 which excludes from its coverage the
decisions and interlocutory orders issued under the Labor Code of the Philippines and by the Central
Board of Assessment Appeals.
Among the highest number of cases that are brought up to the Supreme Court are labor cases. Hence,
Senate Bill No. 1495 seeks to eliminate the exceptions enumerated in Section 9 and, additionally,
extends the coverage of appellate review of the Court of Appeals in the decision(s) of the Securities and
Exchange Commission, the Social Security Commission, and the Employees Compensation Commission
to reduce the number of cases elevated to the Supreme Court. (Emphases and corrections ours)
xxx
 Senate Bill No. 1495 authored by our distinguished Colleague from Laguna provides the ideal situation of
drastically reducing the workload of the Supreme Court without depriving the litigants of the privilege of
review by an appellate tribunal.
In closing, allow me to quote the observations of former Chief Justice Teehankee in 1986 in the Annual
Report of the Supreme Court:
x x x Amendatory legislation is suggested so as to relieve the Supreme Court of the burden of
reviewing these cases which present no important issues involved beyond the particular fact
and the parties involved, so that the Supreme Court may wholly devote its time to cases of
public interest in the discharge of its mandated task as the guardian of the Constitution and the
guarantor of the peoples basic rights and additional task expressly vested on it now to
determine whether or not there has been a grave abuse of discretion amounting to lack of
jurisdiction on the part of any branch or instrumentality of the Government.
We used to have 500,000 cases pending all over the land, Mr. President. It has been cut down to 300,000
cases some five years ago. I understand we are now back to 400,000 cases. Unless we distribute the
work of the appellate courts, we shall continue to mount and add to the number of cases pending.
In view of the foregoing, Mr. President, and by virtue of all the reasons we have submitted, the Committee
on Justice and Human Rights requests the support and collegial approval of our Chamber.
xxx
Surprisingly, however, in a subsequent session, the following Committee Amendment was introduced by the said
sponsor and the following proceedings transpired:[20]
Senator Roco. On page 2, line 5, after the line Supreme Court in accordance with the Constitution, add
the phrase THE LABOR CODE OF THE PHILIPPINES UNDER P.D. 442, AS AMENDED. So that it
becomes clear, Mr. President, that issues arising from the Labor Code will still be appealable to the
Supreme Court.
The President. Is there any objection? (Silence) Hearing none, the amendment is approved.
Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This was also discussed with our
Colleagues in the House of Representatives and as we understand it, as approved in the House, this was also
deleted, Mr. President.
The President. Is there any objection? (Silence) Hearing none, the amendment is approved.
Senator Roco. There are no further Committee amendments, Mr. President.
Senator Romulo. Mr. President, I move that we close the period of Committee amendments.
The President. Is there any objection? (Silence) Hearing none, the amendment is approved. (Italics supplied)
xxx
Thereafter, since there were no individual amendments, Senate Bill No. 1495 was passed on second reading and
; Record of the Senate, Vol. V, No. 63, pp.
being a certified bill, its unanimous approval on third reading followed.[21]
180-181.21 The Conference Committee Report on Senate Bill No. 1495 and House Bill No. 10452, having
theretofore been approved by the House of Representatives, the same was likewise approved by the Senate on
inclusive of the dubious formulation on appeals to the Supreme Court earlier discussed.
February 20, 1995,[22]
The Court is, therefore, of the considered opinion that ever since appeals from the NLRC to the Supreme Court
were eliminated, the legislative intendment was that the special civil action of certiorari was and still is the proper
vehicle for judicial review of decisions of the NLRC. The use of the word appeal in relation thereto and in the
instances we have noted could have been a lapsus plumae because appeals by certiorari and the original action for
certiorari are both modes of judicial review addressed to the appellate courts. The important distinction between
them, however, and with which the Court is particularly concerned here is that the special civil action of certiorari is
within the concurrent original jurisdiction of this Court and the Court of Appeals;[23] whereas to indulge in the
assumption that appeals by certiorari to the Supreme Court are allowed would not subserve, but would subvert, the
intention of Congress as expressed in the sponsorship speech on Senate Bill No. 1495.
Incidentally, it was noted by the sponsor therein that some quarters were of the opinion that recourse from the
NLRC to the Court of Appeals as an initial step in the process of judicial review would be circuitous and would
prolong the proceedings. On the contrary, as he commendably and realistically emphasized, that procedure would
be advantageous to the aggrieved party on this reasoning:
On the other hand, Mr. President, to allow these cases to be appealed to the Court of Appeals would give
litigants the advantage to have all the evidence on record be reexamined and reweighed after which the
findings of facts and conclusions of said bodies are correspondingly affirmed, modified or reversed.
Under such guarantee, the Supreme Court can then apply strictly the axiom that factual findings of the
Court of Appeals are final and may not be reversed on appeal to the Supreme Court. A perusal of the
records will reveal appeals which are factual in nature and may, therefore, be dismissed outright by

minute resolutions.[24]
While we do not wish to intrude into the Congressional sphere on the matter of the wisdom of a law, on this score
we add the further observations that there is a growing number of labor cases being elevated to this Court which,
not being a trier of fact, has at times been constrained to remand the case to the NLRC for resolution of unclear or
ambiguous factual findings; that the Court of Appeals is procedurally equipped for that purpose, aside from the
increased number of its component divisions; and that there is undeniably an imperative need for expeditious action
on labor cases as a major aspect of constitutional protection to labor.
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the
Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict observance of the
doctrine on the hierarchy of courts as the appropriate forum for the relief desired.
Apropos to this directive that resort to the higher courts should be made in accordance with their hierarchical order,
this pronouncement in Santiago vs. Vasquez, et al.[25] should be taken into account:
One final observation. We discern in the proceedings in this case a propensity on the part of petitioner,
and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to
disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the
fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction,
or is even mandated by law to be sought therein. This practice must be stopped, not only because of the
imposition upon the precious time of this Court but also because of the inevitable and resultant delay,
intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the
lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues
since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not
entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or
where exceptional and compelling circumstances justify availment of a remedy within and calling for the
exercise of our primary jurisdiction.
WHEREFORE, under the foregoing premises, the instant petition for certiorari is hereby REMANDED, and all
pertinent records thereof ordered to be FORWARDED, to the Court of Appeals for appropriate action and
disposition consistent with the views and ruling herein set forth, without pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Martinez,
Quisumbing, and Purisima, JJ., concur.

G.R. No. 93783 December 11, 1992

EVANGELINE C. BUCAD, petitioner,
vs.
COURT OF APPEALS, ASILDA GUANZON, WILLIAM GUANZON, and EMILIA GUANZON, respondents.
NOCON, J.:
This is a petition for review on certiorari by Evangeline C. Bucad from the decision 1 dated April 24, 1990 of the
Court of Appeals in CA-G.R. CV No. 19321, affirming the dismissal of petitioner's complaint against respondents
Asilda Guanzon, William Guanzon and Emilia Guanzon for annulment of sale and cancellation of certificate of title
by the Regional Trial Court of Cebu, Branch XXIII.
There is no dispute as to the findings of fact made by the Court of Appeals, which We quote, as follows:
Plaintiff-appellant Evangeline C. Bucad is the granddaughter of Conrado Bucad. On March 16, 1982, a residential
land, with an area of 409 square meters, in Fuente Osmea, Cebu was sold to her by her grandfather. It appears
that although the land is covered by the Property Registration Decree (PD No. 1529), the sale was not registered
because the owner's duplicate copy of TCT No. 9192 was in possession of Felipe Valencia to whom the land had
earlier been mortgaged.
On December 22, 1982, Conrado Bucad again sold the land to the defendant-appellees. Asilda Guanzon, married
to William Guanzon, and to Emilia Guanzon, whom registered their sale on January 4, 1983 after paying off the
mortgage lien of Felipe Valencia. Although plaintiff-appellant made an affidavit of adverse claim, which was
annotated on the certificate of title of Conrado Bucad on December 27, 1982, this fact did not prevent the
defendant-appellees from registering the sale in their favor and from securing a new title (TCT No. 85965) in their
names.
It appears that a subsequent suit brought by defendant-appellees against plaintiff-appellant for ejectment was
dismissed on the ground that the defendant-appellees did not have prior possession of the land. Although in its
decision the Regional Trial Court stated that defendant-appellees could not claim ownership of the land because at
the time they registered their sales they had notice of the adverse claim of the plaintiff-appellant (Civil Case No.
R-26062), the decision of this Court affirming the lower court's judgement, was based solely on the consideration
that since defendant-appellees did not have prior possesion of the land, an action for ejectment was not the
appropriate remedy (Guanzon vs. Dizon, CA-G.R. SP No. 09914, Sept. 30, 1987).
On May 8, 1985 plaintiff-appellant brought this suit for annulment of the sale to the defendant-appellees and for the
cancellation of their certificate of title. After the filing of defendant-appellees' answer and trial, the lower court
rendered a decision, holding that the plaintiff-appellant did not have a perfected sale because of plaintiff-appelant's
failure to pay Conrado Bucad's indebtedness to Felipe Valencia. Consequently art. 1544 of the Civil Code which
provides that if the same thing is sold to different persons ownership shall be transferred to the person who in good
faith is first in recording his sale, does not apply. The lower court ordered:
Wherefore, premises all considered, this Court hereby orders the dismissal of the instant complaint, and for plaintiff
to pay defendants.
1. P5,000.00 as litigation expenses.
2. P2,000.00 representing attorney's fees, plus costs.
IT IS SO ORDERED. 2
In dismissing the petitioner's appeal, the appellate court found that the appeal did not comply with Section 16, Rule
46 of the Rules of Court with regard to the contents of an appellant's brief, particularly paragraphs (b) and (d) and
thus dismissable under Section 1 (g), Rule 50. Furthermore, the Court of Appeals belied petitioner's contention that
the affirmance of the decision in the ejectment case clearly established that the first vendee (petitioner) is the real
owner of the lot in question, since the appellate court had upheld the decision on another ground, namely, that
respondents did not have prior possession of the land.
After her motion for reconsideration was denied, petitioner instituted the instant petition, arguing that the Court of
Appeals erred (1) in not appreciating that respondents are not registrants in good faith within the contemplation of
Article 1544 of the Civil Code; (2) in ignoring the deed of absolute sale executed by Conrado Bucad in her favor;
and (3) in dismissing her appeal on a procedural technicality.
We find the petition unmeritorious.
I
First, on the matter of whether the Court of Appeals was correct for dismissing petitioner's appeal for her failure to
include a statement of facts with page references to the record and assignment of errors in her appellant's brief.
Section 16, Rule 46 of the Rules of Court lists down the items which should be included in the appellant's brief:
Sec. 16 Contents of appellant's brief The appellant's brief shall contain in the order herein indicated the
following.
(a) A subject index of the matter in the brief with a digest of the argument and page references and a table of
cases alphabetically arranged, textbooks and statutes cited with references to the pages were they are cited;
(b) An assignment of the errors intended to be urged. Such errors shall be separately, distinctly and concisely
stated without repetition, and shall be numbered consecutively;
(c) Under the heading "Statement of the Case," a clear and concise statement of the nature of the action, a
summary of the proceedings, the appealed rulings and orders of the court, the nature of the judgement and any
other matters necessary to an understanding of the nature of the controversy, with page references to the record;
(d) Under the heading "Statement of Facts," a clear and concise statement in narrative form of the facts
admitted by both parties and of those in controversy, together with the substance if the proof relating thereto in
sufficient detail to make it clearly intelligible, with page references to the record;
(e) A clear and concise statement of the issues of fact and law to be submitted to the court for its judgment;
(f) Under the heading "Argument," the appellant's arguments on each assignment of error with page
references to the record. The authorities relied upon shall be cited by the page of the report at which the case
begins and the page of the report on which the citation is found.
(g) Under the heading "Relief," a specification of the order or judgment which the appellant seeks.
(h) In cases not brought up by record on appeal, the appellant's brief shall contain as an appendix, a copy of
the judgment or order appealed from.
Non-compliance with paragraphs (b) and (d) of the aforementioned provision subjects the appeal to dismissal under
section 1 (g), Rule 50, which provides:
Sec. 1. Grounds for dismissal An appeal may be dismissed by the Court of Appeals on its own motion or on
that of the appellee, on the following ground:
xxx xxx xxx
(g) Want of specific assignment of errors in the appellant's brief, or of page references to the record as
required in section 16 (d) of Rule 46,
xxx xxx xxx
An examination of the appellant's brief with the Court of Appeals reveals that the name does not comply with
paragraph (a), (b), (c), (e), (f), (g) and (h) of Section 16, Rule 46. In fact, the pleading only mentions at the end that
the appeal is from the decision of the trial count in an action for annulment of sale and cancellation of the certificate
of title filed by petitioner. Dismissal of the appeal was therefore warranted.
While admitting that she failed to observed some of the requirements of the Rules of Court, petitioner was that the
Rules be liberally construed in her favor.
We are unmoved by petitioner's plea.
The purpose of an assignment of errors is to point out to the appellate court the specific portion of the decision
appealed from which the appellant seeks to controvert. 3 This requirement is deemed complied with where the
assignment of errors are embodied in the arguments, and the clear discussion of the points in issue have
accomplished the task of informing the Court which part of the appealed decision is sought to be reviewed. 4
Petitioner's brief in the Court of Appeals is severely wanting on this matter. It does not appraise the appellate court
of the portions of the trial court's decision which she contests, but rather, it quoted at length the decision of the
Regional Trial Court in the ejectment case. 5 Consequently, We see no reason for a liberal interpretation of the
Rules of Court in petitioner's case.
II
Now to the heart of the petition. The case at bar is an instance of double sale of real property, in which case, Article
1544 of the Civil Code provides:
Art. 1544 ....
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith recorded it
in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession,
and in the absence thereof, to the person who presents the oldest title, provided there is good faith.
Petitioner argues that the Court of Appeals erred in not considering respondents as registrants in bad faith since at
the time they registered their deed of sale, petitioner had already caused the annotation of an adverse claim on the
title of the vendee, Conrado Bucad.
We do not agree.
Well-settled is the rule that the registration of a deed of sale by either the first of second buyer must be made in
good faith. 6 We see no objection in applying said rule to the annotation of an adverse claim in double sales.
In the case at bar, the annotation of petitioner's adverse claim was attended by bad faith since at that time it was
made in December 27, 1982, petitioner had known of the previous sale to the respondents. This was established by
the testimony of Francisca Bucad, mother of petitioner, who stated that petitioner had learned of the second sale on
December 24, 1982. 7 (Francisca Bucad is petitioner's duly constituted attorney-in-fact inasmuch as the latter is
residing in the United States.) Consequently, the annotation is of no force and effect as against respondents.
Moreover, petitioner's actual knowledge of the subsequent sale is equivalent to registration of the sale. 8
Since petitioner failed to prove that respondents knew of the prior sale of the property to her, respondents are
considered to have registered their deed in good faith and thus ownership of the disputed property should belong to
them.
Petitioner cannot rely on the decision of the Court of Appeals in CA-G.R. SP No. 09914 dated September 30, 1987 9
in support for her position. In said case, the Court of Appeals affirmed the dismissal of the complaint for ejectment
filed by respondents against petitioner on the ground that the former did not have prior possession of the subject
In fact, the appellate court stated:
property, and not on the basis of Article 1544. 10
The Court sees no further need to discuss the petitioner's assignments of error. Their cause is not founded upon
deprivation of prior possession but one that involves mainly the question of ownership, the parties appearing to be
vendees of the same property from the same vendor. Clearly, it is a cause beyond the Metropolitan Trial Court's
competence. 11
Besides, the inferior court in the ejectment case erred in applying Article 1544 and in declaring respondents as in
bad faith since petitioner's knowledge of the sale of the subject property to the respondents had caused the
automatic registration of the same ahead of the annotation of petitioner's adverse claim, as earlier discussed.
WHEREFORE, the instant petition for review on certiorari is hereby DISMISSED. The decision appealed from is
hereby AFFIRMED in toto. Costs against petitioner.
SO ORDERED
Narvasa, C.J., Feliciano, Regalado, and Campos, JJ., concur.

------------------------------

G.R. No. 89132 February 26, 1990

LEONCIA, MANUEL, DIOSDADA, ANTONIA, ISIDRO, GERONIMO, CRESENCIO, ALEJANDRO, BONIFACIA, AURELIO,

EPIFANIO, POLICARPO, IRENEO, ALL SURNAMED BACLAYON; HRS. of AGRIPINA BACLAYON, rep. by LUCIA BACLAYON;

HRS. of MODESTA BACLAYON, rep. by FILING BACLAYON; HRS. OF HIPOLITO BACLAYON, rep. BY MARIO BACLAYON;

HRS. OF TOMAS BACLAYON, rep. by CRISTITO BACLAYON; SILVESTRE ABANES; HRS. of LEONICA ABELLARE, rep. by

FELIX BACLAYON; CECILIA, HERMINIA, FELIX, CONCORDIA, all surnamed DELA VICTORIA; and THE HON. JUDGE

GERMAN LEE, JR., Presiding Judge of Branch XV, RTC, Cebu, petitioners,
vs.

THE HON. COURT OF APPEALS, HEIRS OF SPOUSES MARCIANO BACALSO AND GREGORIA SABANDEJA, namely,

ARCADIA, FRANCISCA, JOSEFA, DIONESIA, VALENTINA, ANGELA, VENANCIO, DOMINGA and FELIMON, all surnamed

BACALSO, respondents.

Leonardo Garcillano for petitioners.

Jesus N. Borromeo for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals dated April 28, 1989 ordering the trial court, in a

hearing supplementary to execution, to receive private respondents' evidence to prove that they are builders in good faith of the

improvements and the value of said improvements, and its resolution dated June 20, 1989 denying the motion for reconsideration.

The antecedent facts are as follows:

On May 7, 1969, petitioners Leoncia, Martin, Policarpio, Hilarion, Ireneo, Juliana and Tomas, all surnamed Baclayon; Rosendo,

Felicidad and Silvestra, all surnamed Abanes; and Tomasa, Leoncia, Anacleto, Monica, Guillerma and Gertrudes all surnamed

Abellare filed with the then CFI-Cebu Branch 2, in Civil Case No. R-11185, a complaint for recovery of ownership and possession, and

damages, against spouses Marciano Bacalso and Gregoria Sabandeja of Lot No. 5528 of the Cebu Cadastre. The latter filed their

answer thereto on July 15, 1969.

On December 20, 1982, the trial court rendered a decision in favor of the Bacalso spouses, declaring them owners of the subject lot,

which decision was appealed by the petitioners to the respondent Court of Appeals. The case was docketed as AC-G.R. CV No.

04948.

On July 29, 1986, the respondent court rendered a decision reversing the trial court, the dispositive portion of which reads as follows

(p. 15, Rollo):

WHEREFORE, the decision a quo is hereby reversed and set aside and another one is rendered declaring plaintiffs-appellants as

heirs of the late Matias Baclayon the owners of Lot No. 5528 of the Cebu Cadastre covered by Original Certificate of Title No. 2726

(O-NA) of the Registry of Deeds of Cebu (Exh. I) and ordering defendants to vacate the lot and surrender the same to plaintiffs. No

costs.

SO ORDERED.

The private respondents then elevated the case to this Court by filing a petition for review which was, however, denied in the

Resolution dated May 27, 1987.

The decision in favor of the petitioners having become final and executory, they filed a motion for execution of judgment and

possession which was opposed by the private respondents. The opposition was based on the pronouncement of the respondent court

in its decision dated July 29, 1986, to wit (p. 16, Rollo):
No fraud or bad faith could be imputed on the part of the Bacalso spouses. They believed the lot they bought from Segundo Baclayon

was the land they occupied.

The private respondents argued that since they were found by the respondent court as builders and/or planters in good faith and

Article 546 of the Civil Code ordains that the necessary and useful expenses for the improvements must be paid to the

builders/planters in good faith with right of retention, a reception of evidence to determine the correct value of the necessary and

useful improvements must be done first before ordering the execution.

The RTC-Branch 15, Cebu City, presided by Judge German G. Lee, Jr., in its order, dated March 8, 1988, granted the motion for

execution of judgment and possession, to wit (p. 16, Rollo):

ORDER

This is finally, acting on the Motion for Execution of Judgment and Possession filed by Atty. Garcillano in this case and the rejoinder of

Atty. Nacua and the plaintiffs' rejoinder dated February 11 and the manifestation of Atty. Garcillano of February 26, 1988.

It appearing that the dispositive portion of the decision of the Court of Appeals which is now being enforced categorically declares

plaintiffs/appellants as heirs of the late Matias Baclayon, the owner of Lot No. 5526 (sic) of the Cebu Cadastre, covered by Original

Certificate of Title No. 2728 (sic) (0-NA) of the Registry of Deeds of Cebu (Exh. 1) and ordering the defendants to vacate the lot and

surrender the same to the plaintiffs, this Court is not in a position to entertain any further claims by any parties in connection with said

case.

However, if the clients of Atty. Nacua believe that they can prove their claims, then they should file a separate civil case to recover the

same as this Court cannot pass judgment anew on certain claims that should have been interposed as counter-claims in this case.

Wherefore, the Opposition to the issuance of the Writ of execution is hereby DENIED, as the Clerk of Court is hereby ordered to issue

a writ of Execution in this case.

SO ORDERED.

The private respondents appealed the said order of March 8, 1988 by filing a notice of appeal dated March 30, 1988 which appeal

was, however, dismissed by Judge Lee in the order dated April 15, 1988.

On April 29, 1988, the petitioners filed a motion for writ of possession and demolition to which motion the private respondents filed

their opposition reiterating the ground in the opposition to the motion for execution and possession.

Judge Lee, thereafter, issued the order dated August 19, 1988, to wit (p. 17, Rollo):

ORDER

An examination of the records of this case reveals that until now, there is yet no action by the Court of Appeals on the Clarificatory

motion filed by the losing party.

The Court has allowed this excuse to defer its issuance of an order of demolition after the prevailing party has prayed the Court to

issue one.

With the long passage of time, since the judgment in this case has become final, this Court cannot allow any further delay in the

enforcement of its judgment.

WHEREFORE, it is finally ordered that the losing party in this case be given fifteen (15) days from today within which to effect a

voluntary removal of any improvements that they have introduced in the premises, considering that the prevailing party refused to

reimburse the losing party therefor, and if they do not demolish it after the expiration of this 15 days, this Court will be constrained to

order its demolition as prayed for.

IT IS SO ORDERED.

On September 19, 1988, the private respondents filed a petition for certiorari, mandamus and prohibition with the respondent court

concerning the orders dated March 8, 1988 and August 19, 1988.

On April 28, 1989, the respondent court granted the petition, the dispositive portion of which reads as follows (p. 21, Rollo):

WHEREFORE, the orders of March 8,1988 and August 19, 1988 issued in Civil Case No. R-11185 by the RTC-Cebu City, Branch 15,

are hereby SET ASIDE and ANNULLED. In a hearing supplementary to execution, the said court is hereby ordered to receive

petitioners' evidence to prove that they are builders in good faith of the improvements and the value of the said improvements

introduced by them in the subject Lot 5528.

IT IS SO ORDERED.

The motion for reconsideration was denied. Hence, the present petition.

The only issue is whether or not the private respondents should be allowed, in a hearing supplementary to execution, to present

evidence to prove that they are builders in good faith of the improvements and the value of said improvements.

Petitioners allege that the orders dated March 8, 1988 and August 19, 1988 are legitimate having been issued by a judge presiding a

court of competent jurisdiction, pursuant to his duties which are ministerial in nature, to enforce a decision which is already final and

executory.

In ordering the trial court to receive private respondent's evidence to prove that they are builders in good faith of the improvements and

the value of said improvements, reliance was placed by the respondent court in the cases of Naga Development Corporation v. Court

of Appeals, et al., G.R. No. L-28173, September 30, 1971, 41 SCRA 105 and Vda. de Chi v. Tanada, etc., et al., G.R. No. L-27274,

January 30, 1982, 111 SCRA 190.

We shall narrate the facts in these two cases in a nutshell:

1) In the former case, Pacific Merchandising Corporation (Pacific) filed a complaint against Naga Development Corporation

(Naga) for the balance of its indebtedness in the amount of P143,282.76. For failure to file an answer within the period, Naga was

declared in default. In its affidavit of merit attached to the motion to set aside the order of default, Naga asserted that it had made

certain payments to Pacific which should be deducted from the amount of the claim. The motion was denied. A judgment by default

was rendered ordering Naga to pay said balance of indebtedness. The decision was affirmed by the Court of Appeals and also by this

Court, with the qualification that Naga was allowed to prove, during the process of execution of the judgment, whatever payments it

had made to Pacific, either before or after the filing of the complaint, which constitute a proper deduction from the principal sum

ordered to be paid. Thus, We rationalized (41 SCRA 115-116):

Bearing in mind the nature of the instant suit and considering that the Court of Appeals' concurrence in the trial court's assessment of

the amount of P143,282.76 is in the nature of a factual finding, this Court cannot now pass upon its correctness. The two courts below

had before them the sales agreement between the parties, and to what extent the parties complied with their respective prestations

thereunder was purely a matter of evidence.

However, although we cannot pass upon the correctness of the said assessment, it is quite obvious that in the execution of its

judgment as affirmed by the Court of Appeals, the trial court cannot compel the Naga to pay more than what it actually owes the

Pacific under the terms of their covenant. Deeply imbedded in our legal system are the principles that no man may unjustly enrich

himself at the expense of another, and that every person must, in the exercise of his rights, act with justice, give everyone his due, and

observe honesty and good faith. ... .

2) In the latter case, an action for recovery of damages as a result of a vehicular accident was filed by Rosita Yap Vda. de Chi

against Alfonso Corominas, Jr., the owner of the bus, and Simplicio Lawas, the driver. Since the vehicle was insured, a third-party

complaint was filed against the surety company. The trial court rendered judgment against Corominas, Jr. and Lawas by ordering them

jointly and severally to pay P40,302.31 to Vda. de Chi. In turn, the surety company was ordered to indemnify Corominas, Jr. by the

same amount. A writ of execution was issued against the defendants and the surety company. The decision was only partially satisfied

because P6,700.00 has remained unpaid. Later, upon motion of the Southern Islands Hospital, the trial court ordered the surety

company to pay directly to the hospital the amount of P686.35 out of the residue of the unpaid judgment; upon motion of the Chong

Hua Hospital, the trial court issued another order requiring Corominas, Jr. and the surety company to pay the hospital the amount of

P4,238.56. These two orders were questioned before this Court by Vda. de Chi. We set aside said orders and ordered the trial court to

conduct a hearing, after proper notice to the parties, to determine whether or not the hospital bills incurred by Vda. de Chi have been

paid, and thereafter, to render a decision accordingly. Thus, We explained (111 SCRA 196-197):

Technically it was error for the respondent Court to order the defendants and the surety company to pay the respondents Southern

Islands Hospital and Chong Hua Hospital the amounts of P686.35 and P4,238.56, respectively, from the balance of the judgment yet

to be paid to the herein petitioner by the defendants and the surety company since the said respondents are not parties in the case.

The judgment sought to be executed specifically ordered the defendants Alfonso Corominas, Jr. and Simplicio Lawas to pay, jointly

and severally, the plaintiff Rosita Yap Vda. de Chi, the amount of P40,302.31, plus costs; and for the surety company to indemnify the

defendant Alfonso Corominas, Jr. the amount of P40,302.31, which the said defendant is ordered to pay the plaintiff. Consequently, to

order the payment of certain portions thereof to the herein respondent hospitals, Southern Islands Hospital and Chong Hua Hospital,

would be to modify, alter, or vary the terms of the judgment. While the said respondents may have an interest over the said amounts

claimed by them, their remedy was not to file a mere ex-parte motion before the court, but to file separate and independent actions

before courts of competent jurisdiction, since the judgment rendered in the case had already become final and almost executed and

the law allows no intervention after the trial has been terminated.

On the other hand, it cannot also be denied that the sums of money in question have been awarded to the herein petitioner as

expenses for her hospitalization in the respondent hospitals and are based upon petitioner's own evidence. To order the filing of a
separate and independent action to recover a claim where the respondent hospitals concerned will have to prove exactly a claim

which had already been tried, litigated and adjudged would unduly result in multiplicity of suits. Considering that the herein

respondents claim that the herein petitioner has not yet paid the amounts she incurred for hospitalization, the interests of justice will be

best served if a hearing be conducted to determine whether or not the hospital bills have been paid, instead of requiring the

respondent hospitals to file separate actions to recover their respective claims.

The aforementioned reliance on these two cases was misplaced. The common denominator between these two cases is the existence

of a defense/claim which has been raised/tried before the trial court. In the Naga case, the defense of payments made to Pacific which

are properly deductible from the principal sum ordered to be paid by Naga to Pacific was part of the issues which Naga was not

allowed to prove, being already in default. In the Vda. de Chi case, her claim of hospitalization expenses incurred in the respondent

hospital has been litigated and adjudged. The respondent court failed to appreciate that this shared denominator does not obtain in the

present case. The defense of builders in good faith of the improvements and evidence of the value of said improvements were not

raised/ presented before the trial court.

More importantly, in the recent case of First Integrated Bonding and Insurance Co., Inc., et al. v. Isnani, etc., et al., G.R. 70246, July

31, 1989, which involved a similar issue, We ruled:

Significantly, the decision of September 30, 1971 in Naga Development Corporation vs. Court of Appeals, on which total reliance has

been placed by the petitioners, does not appear to have been reaffirmed by this Court in subsequent cases. It is Justice Antonio

Barredo's dissent (quoted below) that appears to have been firmed up in later decisions of this Court:

"... I believe that since Naga has been declared in default, and no grave abuse of discretion having been found by the Court in that

respect, the judgment by default must stand and be executed, as is. Whether or not Naga has partially paid was part of the issue

before the court before judgment was rendered, Naga through its own fault was not allowed to prove any such partial payment by the

trial court; surely, that issue cannot be reopened during the execution because that would tend to vary the terms of the judgment. The

matters of equity which can be raised in an execution proceeding, cannot to my mind, refer to those which the court could have

passed upon before judgment. Otherwise, there will be no end to litigation, since conceivably the proof of partial payments could be so

seriously controversial as to need another full blown trial, decision and appeal. It is my view that under the circumstances, Naga can

do no more than address itself to the benignity or conscience of the private respondent. (Emphasis supplied; 41 SCRA 105, 119.)"

The rule is well established that once a decision has become final and executory the only jurisdiction left with the trial court is to order

its execution. To require now the trial court in a hearing supplementary to execution, to receive private respondents' evidence to prove

that they are builders in good faith of the improvements and the value of said Improvements, is to disturb a final executory decision;

which may even cause its substantial amendment. It appears that the private respondent's opposition to the motion for the execution

of the judgment, possession and demolition is their last straw to prevent the satisfaction of the judgment. Sad to say, We have to cut

this straw.

We disagree with the respondent court that any counterclaim for reimbursement of the value of the improvements thereon by reason

of private respondents' being builders in good faith, which presupposes that they are not the owners of the land, would run counter to
the defense of ownership and therefore could not have been set up before the trial court. It should be emphasized that Rule 8, Section

2 of the Rules of Court allows a party to set forth two or more statements of a claim or defense alternatively or hypothetically, either in

one cause of action or defense or in separate causes of action or defenses. This Court, in Castle Bros., Wolf and Sons v. Go-Juno, 7

Phil. 144, even held that inconsistent defenses may be pleaded alternatively or hypothetically provided that each defense is consistent

with itself. Mention must also be made of the case of Camara, et al. v. Aguilar, et al., 94 Phil. 527, where We ruled:

The contention that a counterclaim for expenses incurred in clearing and cultivating the parcel of land and planting coconut and other

fruit-bearing trees therein could not have been set up in the former case because that would have been inconsistent with or would

have weakened the claim that they were entitled to the parcel of land, is without merit, because 'A party may set forth two or more

statements of a claim or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of

action or defenses.' Hence, the plaintiffs herein and intervenors in the former case could have set up the claim that they were entitled

to the parcel of land and alternatively that assuming (hypothetically) that they were not entitled to the parcel of land at least they were

entitled as possessors in good faith to the coconut and other fruit-bearing trees planted by them in the parcel of land and their fruits or

their value. (Emphasis supplied)

A corollary question that We might as well resolve now (although not raised as an issue in the present petition, but conformably with

Gayos, et al. v. Gayos, et al., G.R. No. L-27812, September 26, 1975, 67 SCRA 146, that it is a cherished rule of procedure that a

court should always strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future

litigation) is whether or not the private respondents can still file a separate complaint against the petitioners on the ground that they are

builders in good faith and consequently, recover the value of the imprvements introduced by them on the subject lot. The case of Heirs

of Laureano Marquez v. Valencia, 99 Phil. 740, provides the answer:

If, aside from relying solely on the deed of sale with a right to repurchase and failure on the part of the vendors to purchase it within

the period stipulated therein, the defendant had set up an alternative though inconsistent defense that he had inherited the parcel of

land from his late maternal grandfather and presented evidence in support of both defenses, the overruling of the first would not bar

the determination by the court of the second. The defendant having failed to set up such alternative defenses and chosen or elected to

rely on one only, the overruling thereof was a complete determination of the controversy between the parties which bats a subsequent

action based upon an unpleaded defense, or any other cause of action, except that of failure of the complaint to state a cause of

action and of lack of jurisdiction of the Court. The determination of the issue joined by the parties constitutes res judicata. (Emphasis

supplied)

Although the alternative defense of being builders in good faith is only permissive, the counterclaim for reimbursement of the value of

the improvements is in the nature of a compulsory counterclaim. Thus, the failure by the private respondents to set it up bars their right

to raise it in a subsequent litigation (Rule 9, Section 4 of the Rules of Court). We realize the plight of the private respondents, the rule

on comlpulsory counterclaim is designed to enable the disposition of the whole controversy at one time and in one action. The

philosophy of the rule is to discourage multiplicity of suits.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the Court of Appeals dated April 28, 1989 and its resolution dated

June 20, 1989 are SET ASIDE and the orders dated March 8, 1988 and August 19, 1988 of the Regional Trial Court of Cebu City,

Branch 15 are REINSTATED.

SO ORDERED.