Republic of the Philippines On July 3, 1996, the petitioners filed with the RTC a Complaint4 for partition,
SUPREME COURT accounting and damages against Florante, Rita and Panfila. They alleged therein
Manila
SECOND DIVISION
G.R. No. 182435 August 13, 2012
LILIA B. ADA, LUZ B. ADANZA, FLORA C. BA YLON, REMO BA YLON, JOSE BA YLON,
ERIC BA YLON, FLORENTINO BA YLON, and MA. RUBY BA YLON, Petitioners,
vs.
FLORANTE BA YLON, Respondent.
VILLARAMA, JR.,*
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision 1 dated October 26, 2007 rendered
by the Court of Appeals (CA) in CA-G.R. CV No. 01746. The assailed decision partially
reversed and set aside the Decision2 dated October 20, 2005 issued ~y the Regional
Trial Court (RTC), Tan jay City, Negros Oriental, Branch 43 in Civil Case No. 11657.
The Antecedent Facts
This case involves the estate of spouses Florentino Baylon and Maximina Elnas
Baylon (Spouses Baylon) who died on November 7, 1961 and May 5, 1974,
respectively.3 At the time of their death, Spouses Baylon were survived by their
legitimate children, namely, Rita Baylon (Rita), Victoria Baylon (Victoria), Dolores
Baylon (Dolores), Panfila Gomez (Panfila), Ramon Baylon (Ramon) and herein
petitioner Lilia B. Ada (Lilia).
Dolores died intestate and without issue on August 4, 1976. Victoria died on
November 11, 1981 and was survived by her daughter, herein petitioner Luz B.
Adanza. Ramon died intestate on July 8, 1989 and was survived by herein
respondent Florante Baylon (Florante), his child from his first marriage, as well as by
petitioner Flora Baylon, his second wife, and their legitimate children, namely,
Ramon, Jr. and herein petitioners Remo, Jose, Eric, Florentino and Ma. Ruby, all
surnamed Baylon.
that Spouses Baylon, during their lifetime, owned 43 parcels of land5 all situated in
Negros Oriental. After the death of Spouses Baylon, they claimed that Rita took
possession of the said parcels of land and appropriated for herself the income from
the same. Using the income produced by the said parcels of land, Rita allegedly
purchased two parcels of land, Lot No. 47096 and half of Lot No. 4706,7 situated in
Canda-uay, Dumaguete City. The petitioners averred that Rita refused to effect a
partition of the said parcels of land.
In their Answer,8 Florante, Rita and Panfila asserted that they and the petitioners
co-owned 229 out of the 43 parcels of land mentioned in the latter’s complaint,
whereas Rita actually owned 10 parcels of land10 out of the 43 parcels which the
petitioners sought to partition, while the remaining 11 parcels of land are
separately owned by Petra Cafino Adanza,11 Florante,12 Meliton Adalia,13 Consorcia
Adanza,14 Lilia15 and Santiago Mendez.16 Further, they claimed that Lot No. 4709
and half of Lot No. 4706 were acquired by Rita using her own money. They denied
that Rita appropriated solely for herself the income of the estate of Spouses Baylon,
and expressed no objection to the partition of the estate of Spouses Baylon, but
only with respect to the co-owned parcels of land.
During the pendency of the case, Rita, through a Deed of Donation dated July 6,
1997, conveyed Lot No. 4709 and half of Lot No. 4706 to Florante. On July 16, 2000,
Rita died intestate and without any issue. Thereafter, learning of the said donation
inter vivos in favor of Florante, the petitioners filed a Supplemental
Pleading17 dated February 6, 2002, praying that the said donation in favor of the
respondent be rescinded in accordance with Article 1381(4) of the Civil Code. They
further alleged that Rita was already sick and very weak when the said Deed of
Donation was supposedly executed and, thus, could not have validly given her
consent thereto.
Florante and Panfila opposed the rescission of the said donation, asserting that
Article 1381(4) of the Civil Code applies only when there is already a prior judicial
decree on who between the contending parties actually owned the properties
under litigation.18
The RTC Decision
On October 20, 2005, the RTC rendered a Decision,19 the decretal portion of which
reads:
Wherefore judgment is hereby rendered:
 (1) declaring the existence of co-ownership over parcels nos. 1, 2, 3, 5, 7,
10, 13, 14, 16, 17, 18, 26, 29, 30, 33, 34, 35, 36, 40 and 41 described in the
complaint;
(2) directing that the above mentioned parcels of land be partitioned
among the heirs of Florentino Baylon and Maximina Baylon;
(3) declaring a co-ownership on the properties of Rita Baylon namely
parcels no[s]. 6, 11, 12, 20, 24, 27, 31, 32, 39 and 42 and directing that it
shall be partitioned among her heirs who are the plaintiffs and defendant
in this case;
(4) declaring the donation inter vivos rescinded without prejudice to the
share of Florante Baylon to the estate of Rita Baylon and directing that
parcels nos. 1 and 2 paragraph V of the complaint be included in the
division of the property as of Rita Baylon among her heirs, the parties in
this case;
(5) excluding from the co-ownership parcels nos. 20, 21, 22, 9, 43, 4, 8, 19
and 37.
Considering that the parties failed to settle this case amicably and could not agree
on the partition, the parties are directed to nominate a representative to act as
commissioner to make the partition. He shall immediately take [his] oath of office
upon [his] appointment. The commissioner shall make a report of all the
proceedings as to the partition within fifteen (15) days from the completion of this
partition. The parties are given ten (10) days within which to object to the report
after which the Court shall act on the commissioner report.
SO ORDERED.20 (Emphasis ours)
The RTC held that the death of Rita during the pendency of the case, having died
intestate and without any issue, had rendered the issue of ownership insofar as
parcels of land which she claims as her own moot since the parties below are the
heirs to her estate. Thus, the RTC regarded Rita as the owner of the said 10 parcels
of land and, accordingly, directed that the same be partitioned among her heirs.
Nevertheless, the RTC rescinded the donation inter vivos of Lot No. 4709 and half of
Lot No. 4706 in favor of Florante. In rescinding the said donation inter vivos, the
RTC explained that:
However, with respect to lot nos. 4709 and 4706 which [Rita] had conveyed to
Florante Baylon by way of donation inter vivos, the plaintiffs in their supplemental
pleadings (sic) assailed the same to be rescissible on the ground that it was entered
into by the defendant Rita Baylon without the knowledge and approval of the
litigants [or] of competent judicial authority. The subject parcels of lands are
involved in the case for which plaintiffs have asked the Court to partition the same
among the heirs of Florentino Baylon and Maximina Elnas.
Clearly, the donation inter vivos in favor of Florante Baylon was executed to
prejudice the plaintiffs’ right to succeed to the estate of Rita Baylon in case of death
considering that as testified by Florante Baylon, Rita Baylon was very weak and he
tried to give her vitamins x x x. The donation inter vivos executed by Rita Baylon in
favor of Florante Baylon is rescissible for the reason that it refers to the parcels of
land in litigation x x x without the knowledge and approval of the plaintiffs or of this
Court. However, the rescission shall not affect the share of Florante Baylon to the
estate of Rita Baylon.21
Florante sought reconsideration of the Decision dated October 20, 2005 of the RTC
insofar as it rescinded the donation of Lot No. 4709 and half of Lot No. 4706 in his
favor.22 He asserted that, at the time of Rita’s death on July 16, 2000, Lot No. 4709
and half of Lot No. 4706 were no longer part of her estate as the same had already
been conveyed to him through a donation inter vivos three years earlier. Thus,
Florante maintained that Lot No. 4709 and half of Lot No. 4706 should not be
included in the properties that should be partitioned among the heirs of Rita.
On July 28, 2006, the RTC issued an Order23 which denied the motion for
reconsideration filed by Florante.
The CA Decision
On appeal, the CA rendered a Decision24 dated October 26, 2007, the dispositive
portion of which reads:
WHEREFORE, the Decision dated October 20, 2005 and Order dated July 28, 2006
are REVERSEDand SET ASIDE insofar as they decreed the rescission of the Deed of
Donation dated July 6, 1997 and the inclusion of lot no. 4709 and half of lot no.
4706 in the estate of Rita Baylon. The case is REMANDED to the trial court for the
determination of ownership of lot no. 4709 and half of lot no. 4706.
SO ORDERED.25
The CA held that before the petitioners may file an action for rescission, they must
first obtain a favorable judicial ruling that Lot No. 4709 and half of Lot No. 4706
actually belonged to the estate of Spouses Baylon and not to Rita. Until then, the CA
asserted, an action for rescission is premature. Further, the CA ruled that the
petitioners’ action for rescission cannot be joined with their action for partition,
accounting and damages through a mere supplemental pleading. Thus:
If Lot No. 4709 and half of Lot No. 4706 belonged to the Spouses’ estate, then Rita
Baylon’s donation thereof in favor of Florante Baylon, in excess of her undivided
share therein as co-heir, is void. Surely, she could not have validly disposed of
something she did not own. In such a case, an action for rescission of the donation
may, therefore, prosper.
If the lots, however, are found to have belonged exclusively to Rita Baylon, during
her lifetime, her donation thereof in favor of Florante Baylon is valid. For then, she
merely exercised her ownership right to dispose of what legally belonged to her.
Upon her death, the lots no longer form part of her estate as their ownership now
pertains to Florante Baylon. On this score, an action for rescission against such
donation will not prosper. x x x.
Verily, before plaintiffs-appellees may file an action for rescission, they must first
obtain a favorable judicial ruling that lot no. 4709 and half of lot no. 4706 actually
belonged to the estate of Spouses Florentino and Maximina Baylon, and not to Rita
Baylon during her lifetime. Until then, an action for rescission is premature. For this
matter, the applicability of Article 1381, paragraph 4, of the New Civil Code must
likewise await the trial court’s resolution of the issue of ownership.
Be that as it may, an action for rescission should be filed by the parties concerned
independent of the proceedings below. The first cannot simply be lumped up with
the second through a mere supplemental pleading. 26 (Citation omitted)
The petitioners sought reconsideration27 of the Decision dated October 26, 2007
but it was denied by the CA in its Resolution28 dated March 6, 2008.
Hence, this petition.
Issue
The lone issue to be resolved by this Court is whether the CA erred in ruling that the
donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante
may only be rescinded if there is already a judicial determination that the same
actually belonged to the estate of Spouses Baylon.
The Court’s Ruling
The petition is partly meritorious.
Procedural Matters
Before resolving the lone substantive issue in the instant case, this Court deems it
proper to address certain procedural matters that need to be threshed out which,
by laxity or otherwise, were not raised by the parties herein.
Misjoinder of Causes of Action
The complaint filed by the petitioners with the RTC involves two separate, distinct
and independent actions – partition and rescission. First, the petitioners raised the
refusal of their co-heirs, Florante, Rita and Panfila, to partition the properties which
they inherited from Spouses Baylon. Second, in their supplemental pleading, the
petitioners assailed the donation inter vivos of Lot No. 4709 and half of Lot No.
4706 made by Rita in favor of Florante pendente lite.
The actions of partition and
rescission cannot be joined in a
single action.
By a joinder of actions, or more properly, a joinder of causes of action is meant the
uniting of two or more demands or rights of action in one action, the statement of
more than one cause of action in a declaration. It is the union of two or more civil
causes of action, each of which could be made the basis of a separate suit, in the
same complaint, declaration or petition. A plaintiff may under certain
circumstances join several distinct demands, controversies or rights of action in one
declaration, complaint or petition.29
The objectives of the rule or provision are to avoid a multiplicity of suits where the
same parties and subject matter are to be dealt with by effecting in one action a
complete determination of all matters in controversy and litigation between the
parties involving one subject matter, and to expedite the disposition of litigation at
minimum cost. The provision should be construed so as to avoid such multiplicity,
where possible, without prejudice to the rights of the litigants.30
Nevertheless, while parties to an action may assert in one pleading, in the
alternative or otherwise, as many causes of action as they may have against an
opposing party, such joinder of causes of action is subject to the condition, inter
alia, that the joinder shall not include special civil actions governed by special
rules.31
Here, there was a misjoinder of causes of action. The action for partition filed by the
petitioners could not be joined with the action for the rescission of the said
donation inter vivos in favor of Florante. Lest it be overlooked, an action for
partition is a special civil action governed by Rule 69 of the Rules of Court while an
action for rescission is an ordinary civil action governed by the ordinary rules of civil
procedure. The variance in the procedure in the special civil action of partition and
in the ordinary civil action of rescission precludes their joinder in one complaint or
their being tried in a single proceeding to avoid confusion in determining what rules
shall govern the conduct of the proceedings as well as in the determination of the
presence of requisite elements of each particular cause of action. 32
A misjoined cause of action, if not
severed upon motion of a party or
by the court sua sponte, may be
adjudicated by the court together
with the other causes of action.
Nevertheless, misjoinder of causes of action is not a ground for dismissal. Indeed,
the courts have the power, acting upon the motion of a party to the case or sua
sponte, to order the severance of the misjoined cause of action to be proceeded
with separately.33 However, if there is no objection to the improper joinder or the
court did not motu proprio direct a severance, then there exists no bar in the
simultaneous adjudication of all the erroneously joined causes of action. On this
score, our disquisition in Republic of the Philippines v. Herbieto34 is instructive, viz:
This Court, however, disagrees with petitioner Republic in this regard. This
procedural lapse committed by the respondents should not affect the jurisdiction of
the MTC to proceed with and hear their application for registration of the Subject
Lots.
xxxx
Considering every application for land registration filed in strict accordance with the
Property Registration Decree as a single cause of action, then the defect in the joint
application for registration filed by the respondents with the MTC constitutes a
misjoinder of causes of action and parties. Instead of a single or joint application for
registration, respondents Jeremias and David, more appropriately, should have filed
separate applications for registration of Lots No. 8422 and 8423, respectively.
Misjoinder of causes of action and parties do not involve a question of jurisdiction
of the court to hear and proceed with the case. They are not even accepted
grounds for dismissal thereof. Instead, under the Rules of Court, the misjoinder of
causes of action and parties involve an implied admission of the court’s jurisdiction.
It acknowledges the power of the court, acting upon the motion of a party to the
case or on its own initiative, to order the severance of the misjoined cause of
action, to be proceeded with separately (in case of misjoinder of causes of action);
and/or the dropping of a party and the severance of any claim against said
misjoined party, also to be proceeded with separately (in case of misjoinder of
parties).35 (Citations omitted)
It should be emphasized that the foregoing rule only applies if the court trying the
case has jurisdiction over all of the causes of action therein notwithstanding the
misjoinder of the same. If the court trying the case has no jurisdiction over a
misjoined cause of action, then such misjoined cause of action has to be severed
from the other causes of action, and if not so severed, any adjudication rendered by
the court with respect to the same would be a nullity.
Here, Florante posed no objection, and neither did the RTC direct the severance of
the petitioners’ action for rescission from their action for partition. While this may
be a patent omission on the part of the RTC, this does not constitute a ground to
assail the validity and correctness of its decision. The RTC validly adjudicated the
issues raised in the actions for partition and rescission filed by the petitioners.
Asserting a New Cause of Action in a Supplemental Pleading
In its Decision dated October 26, 2007, the CA pointed out that the said action for
rescission should have been filed by the petitioners independently of the
proceedings in the action for partition. It opined that the action for rescission could
not be lumped up with the action for partition through a mere supplemental
pleading.
We do not agree.
A supplemental pleading may raise
a new cause of action as long as it
has some relation to the original
cause of action set forth in the
original complaint.
Section 6, Rule 10 of the Rules of Court reads:
Sec. 6. Supplemental Pleadings. – Upon motion of a party the court may, upon
reasonable notice and upon such terms as are just, permit him to serve a
supplemental pleading setting forth transactions, occurrences or events which have
happened since the date of the pleading sought to be supplemented. The adverse
party may plead thereto within ten (10) days from notice of the order admitting the
supplemental pleading.
In Young v. Spouses Sy,36 this Court had the opportunity to elucidate on the purpose
of a supplemental pleading. Thus:
As its very name denotes, a supplemental pleading only serves to bolster or add
something to the primary pleading. A supplement exists side by side with the
original. It does not replace that which it supplements. Moreover, a supplemental
pleading assumes that the original pleading is to stand and that the issues joined
with the original pleading remained an issue to be tried in the action. It is but a
continuation of the complaint. Its usual office is to set up new facts which justify,
enlarge or change the kind of relief with respect to the same subject matter as the
controversy referred to in the original complaint.
The purpose of the supplemental pleading is to bring into the records new facts
which will enlarge or change the kind of relief to which the plaintiff is entitled;
hence, any supplemental facts which further develop the original right of action, or
extend to vary the relief, are available by way of supplemental complaint even
though they themselves constitute a right of action.37 (Citations omitted and
emphasis ours)
Thus, a supplemental pleading may properly allege transactions, occurrences or
events which had transpired after the filing of the pleading sought to be
supplemented, even if the said supplemental facts constitute another cause of
action.
Admittedly, in Leobrera v. Court of Appeals,38 we held that a supplemental pleading
must be based on matters arising subsequent to the original pleading related to the
claim or defense presented therein, and founded on the same cause of action. We
further stressed therein that a supplemental pleading may not be used to try a new
cause of action.
However, in Planters Development Bank v. LZK Holdings and Development
Corp.,39 we clarified that, while a matter stated in a supplemental complaint should
have some relation to the cause of action set forth in the original pleading, the fact
that the supplemental pleading technically states a new cause of action should not
be a bar to its allowance but only a matter that may be considered by the court in
the exercise of its discretion. In such cases, we stressed that a broad definition of
"cause of action" should be applied.
Here, the issue as to the validity of the donation inter vivos of Lot No. 4709 and half
of Lot No. 4706 made by Rita in favor of Florante is a new cause of action that
occurred after the filing of the original complaint. However, the petitioners’ prayer
for the rescission of the said donation inter vivos in their supplemental pleading is
germane to, and is in fact, intertwined with the cause of action in the partition case.
Lot No. 4709 and half of Lot No. 4706 are included among the properties that were
sought to be partitioned.
The petitioners’ supplemental pleading merely amplified the original cause of
action, on account of the gratuitous conveyance of Lot No. 4709 and half of Lot No.
4706 after the filing of the original complaint and prayed for additional reliefs, i.e.,
rescission. Indeed, the petitioners claim that the said lots form part of the estate of
Spouses Baylon, but cannot be partitioned unless the gratuitous conveyance of the
same is rescinded. Thus, the principal issue raised by the petitioners in their original
complaint remained the same.
Main Issue: Propriety of Rescission
After having threshed out the procedural matters, we now proceed to adjudicate
the substantial issue presented by the instant petition.
The petitioners assert that the CA erred in remanding the case to the RTC for the
determination of ownership of Lot No. 4709 and half of Lot No. 4706. They maintain
that the RTC aptly rescinded the said donation inter vivos of Lot No. 4709 and half
of Lot No. 4706 pursuant to Article 1381(4) of the Civil Code.
In his Comment,40 Florante asserts that before the petitioners may file an action for
rescission, they must first obtain a favorable judicial ruling that Lot No. 4709 and
half of Lot No. 4706 actually belonged to the estate of Spouses Baylon. Until then,
Florante avers that an action for rescission would be premature.
The petitioners’ contentions are well-taken.
The resolution of the instant dispute is fundamentally contingent upon a
determination of whether the donation inter vivos of Lot No. 4709 and half of Lot
No. 4706 in favor of Florante may be rescinded pursuant to Article 1381(4) of the
Civil Code on the ground that the same was made during the pendency of the
action for partition with the RTC.
Rescission is a remedy to address
the damage or injury caused to the
contracting parties or third
persons.
Rescission is a remedy granted by law to the contracting parties and even to third
persons, to secure the reparation of damages caused to them by a contract, even if
it should be valid, by means of the restoration of things to their condition at the
moment prior to the celebration of said contract.41 It is a remedy to make
ineffective a contract, validly entered into and therefore obligatory under normal
conditions, by reason of external causes resulting in a pecuniary prejudice to one of
the contracting parties or their creditors. 42
Contracts which are rescissible are valid contracts having all the essential requisites
of a contract, but by reason of injury or damage caused to either of the parties
therein or to third persons are considered defective and, thus, may be rescinded.
The kinds of rescissible contracts, according to the reason for their susceptibility to
rescission, are the following: first, those which are rescissible because of lesion or
prejudice;43 second, those which are rescissible on account of fraud or bad
faith;44 and third, those which, by special provisions of law, 45 are susceptible to
rescission.46
Contracts which refer to things
subject of litigation is rescissible
pursuant to Article 1381(4) of the
Civil Code.
Contracts which are rescissible due to fraud or bad faith include those which involve
things under litigation, if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority. Thus,
Article 1381(4) of the Civil Code provides:
Art. 1381. The following contracts are rescissible:
xxxx
(4) Those which refer to things under litigation if they have been entered into by
the defendant without the knowledge and approval of the litigants or of competent
judicial authority.
The rescission of a contract under Article 1381(4) of the Civil Code only requires the
concurrence of the following: first, the defendant, during the pendency of the case,
enters into a contract which refers to the thing subject of litigation; and second, the
said contract was entered into without the knowledge and approval of the litigants
or of a competent judicial authority. As long as the foregoing requisites concur, it
becomes the duty of the court to order the rescission of the said contract.
The reason for this is simple. Article 1381(4) seeks to remedy the presence of bad
faith among the parties to a case and/or any fraudulent act which they may commit
with respect to the thing subject of litigation.
When a thing is the subject of a judicial controversy, it should ultimately be bound
by whatever disposition the court shall render. The parties to the case are therefore
expected, in deference to the court’s exercise of jurisdiction over the case, to
refrain from doing acts which would dissipate or debase the thing subject of the
litigation or otherwise render the impending decision therein ineffectual.
There is, then, a restriction on the disposition by the parties of the thing that is the
subject of the litigation. Article 1381(4) of the Civil Code requires that any contract
entered into by a defendant in a case which refers to things under litigation should
be with the knowledge and approval of the litigants or of a competent judicial
authority.
Further, any disposition of the thing subject of litigation or any act which tends to
render inutile the court’s impending disposition in such case, sans the knowledge
and approval of the litigants or of the court, is unmistakably and irrefutably
indicative of bad faith. Such acts undermine the authority of the court to lay down
the respective rights of the parties in a case relative to the thing subject of litigation
and bind them to such determination.
It should be stressed, though, that the defendant in such a case is not absolutely
proscribed from entering into a contract which refer to things under litigation. If, for
instance, a defendant enters into a contract which conveys the thing under
litigation during the pendency of the case, the conveyance would be valid, there
being no definite disposition yet coming from the court with respect to the thing
subject of litigation. After all, notwithstanding that the subject thereof is a thing
under litigation, such conveyance is but merely an exercise of ownership.
This is true even if the defendant effected the conveyance without the knowledge
and approval of the litigants or of a competent judicial authority. The absence of
such knowledge or approval would not precipitate the invalidity of an otherwise
valid contract. Nevertheless, such contract, though considered valid, may be
rescinded at the instance of the other litigants pursuant to Article 1381(4) of the
Civil Code.
Here, contrary to the CA’s disposition, the RTC aptly ordered the rescission of the
donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante.
The petitioners had sufficiently established the presence of the requisites for the
rescission of a contract pursuant to Article 1381(4) of the Civil Code. It is undisputed
that, at the time they were gratuitously conveyed by Rita, Lot No. 4709 and half of
Lot No. 4706 are among the properties that were the subject of the partition case
then pending with the RTC. It is also undisputed that Rita, then one of the
defendants in the partition case with the RTC, did not inform nor sought the
approval from the petitioners or of the RTC with regard to the donation inter vivos
of the said parcels of land to Florante.
Although the gratuitous conveyance of the said parcels of land in favor of Florante
was valid, the donation inter vivos of the same being merely an exercise of
ownership, Rita’s failure to inform and seek the approval of the petitioners or the
RTC regarding the conveyance gave the petitioners the right to have the said
donation rescinded pursuant to Article 1381(4) of the Civil Code.
Rescission under Article 1381(4) of
the Civil Code is not preconditioned
upon the judicial determination as
to the ownership of the thing
subject of litigation.
In this regard, we also find the assertion that rescission may only be had after the
RTC had finally determined that the parcels of land belonged to the estate of
Spouses Baylon intrinsically amiss. The petitioners’ right to institute the action for
rescission pursuant to Article 1381(4) of the Civil Code is not preconditioned upon
the RTC’s determination as to the ownership of the said parcels of land.
It bears stressing that the right to ask for the rescission of a contract under Article
1381(4) of the Civil Code is not contingent upon the final determination of the
ownership of the thing subject of litigation. The primordial purpose of Article
1381(4) of the Civil Code is to secure the possible effectivity of the impending
judgment by a court with respect to the thing subject of litigation. It seeks to
protect the binding effect of a court’s impending adjudication vis-à-vis the thing
subject of litigation regardless of which among the contending claims therein would
subsequently be upheld. Accordingly, a definitive judicial determination with
respect to the thing subject of litigation is not a condition sine qua non before the
rescissory action contemplated under Article 1381(4) of the Civil Code may be
instituted.
Moreover, conceding that the right to bring the rescissory action pursuant to Article
1381(4) of the Civil Code is preconditioned upon a judicial determination with
regard to the thing subject litigation, this would only bring about the very
predicament that the said provision of law seeks to obviate. Assuming arguendo
that a rescissory action under Article 1381(4) of the Civil Code could only be
instituted after the dispute with respect to the thing subject of litigation is judicially
determined, there is the possibility that the same may had already been conveyed
to third persons acting in good faith, rendering any judicial determination with
regard to the thing subject of litigation illusory. Surely, this paradoxical eventuality
is not what the law had envisioned.
Even if the donation inter vivos is
validly rescinded, a determination
as to the ownership of the subject
parcels of land is still necessary.
Having established that the RTC had aptly ordered the rescission of the said
donation inter vivos in favor of Florante, the issue that has to be resolved by this
Court is whether there is still a need to determine the ownership of Lot No. 4709
and half of Lot No. 4706.
In opting not to make a determination as to the ownership of Lot No. 4709 and half
of Lot No. 4706, the RTC reasoned that the parties in the proceedings before it
constitute not only the surviving heirs of Spouses Baylon but the surviving heirs of
Rita as well. As intimated earlier, Rita died intestate during the pendency of the
proceedings with the RTC without any issue, leaving the parties in the proceedings
before the RTC as her surviving heirs. Thus, the RTC insinuated, a definitive
determination as to the ownership of the said parcels of land is unnecessary since,
in any case, the said parcels of land would ultimately be adjudicated to the parties
in the proceedings before it.
We do not agree.
Admittedly, whoever may be adjudicated as the owner of Lot No. 4709 and half of
Lot No. 4706, be it Rita or Spouses Baylon, the same would ultimately be
transmitted to the parties in the proceedings before the RTC as they are the only
surviving heirs of both Spouses Baylon and Rita. However, the RTC failed to realize
that a definitive adjudication as to the ownership of Lot No. 4709 and half of Lot No.
4706 is essential in this case as it affects the authority of the RTC to direct the
partition of the said parcels of land. Simply put, the RTC cannot properly direct the
partition of Lot No. 4709 and half of Lot No. 4706 until and unless it determines that
the said parcels of land indeed form part of the estate of Spouses Baylon.
It should be stressed that the partition proceedings before the RTC only covers the
properties co-owned by the parties therein in their respective capacity as the
surviving heirs of Spouses Baylon. Hence, the authority of the RTC to issue an order
of partition in the proceedings before it only affects those properties which actually
belonged to the estate of Spouses Baylon.
In this regard, if Lot No. 4709 and half of Lot No. 4706, as unwaveringly claimed by
Florante, are indeed exclusively owned by Rita, then the said parcels of land may
not be partitioned simultaneously with the other properties subject of the partition
case before the RTC. In such case, although the parties in the case before the RTC
are still co-owners of the said parcels of land, the RTC would not have the authority
to direct the partition of the said parcels of land as the proceedings before it is only
concerned with the estate of Spouses Baylon.
WHEREFORE, in consideration of the foregoing disquisitions, the petition
is PARTIALLY GRANTED. The Decision dated October 26, 2007 issued by the Court
of Appeals in CA-G.R. CV No. 01746 is MODIFIED in that the Decision dated October
20, 2005 issued by the Regional Trial Court, Tanjay City, Negros Oriental, Branch 43
in Civil Case No. 11657, insofar as it decreed the rescission of the Deed of Donation
dated July 6, 1997 is hereby REINSTATED. The case is REMANDED to the trial court
for the determination of the ownership of Lot No. 4709 and half of Lot No. 4706 in
accordance with this Decision.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 181622 November 20, 2013
GENESIS INVESTMENT, INC., CEBU JAYA REALTY INC., and SPOUSES RHODORA and
LAMBERT LIM,Petitioners,
vs.
HEIRS of CEFERINO EBARASABAL,* NAMELY: ROGELIO EBARASABAL, SPOUSES
LIGAYA E. GULIMLIM AND JOSE GULIMLIM, SPOUSES VISITACION E. CONEJOS and
ELIAS CONEJOS, BEN TEJERO, POCAS TEJERO, GERTRUDES TEJERO, BANING HAYO,
LACIO EBARASABAL and JULIETA EBARASABAL; HEIRS OF FLORO EBARASABAL,
namely: SOFIA ABELONG, PEPITO EBARASABAL AND ELPIDIO EBARASABAL; HEIRS
OF LEONA EBARASABAL- APOLLO, namely: SILVESTRA A. MOJELLO and
MARCELINO APOLLO; HEIRS OF PEDRO EBARASABAL, namely: BONIFACIO
EBARASABAL, SERGIO EBARASABAL and JAIME EBARASABAL; HEIRS of ISIDRO
EBARASABAL, NAMELY: SPOUSES CARLOSA E. NUEVO and FORTUNATO
NUEVA;** HEIRS of BENITO EBARASABAL, namely: PAULO BAGAAN, SPOUSES
CATALINA A. MARIBAO and RENE MARIBAO, VICENTE ABRINICA and PATRON
EBARASABAL; HEIRS of JULIAN EBARASABAL, NAMELY: ALFREDO BAGAAN, JUAN
BAGAAN, AVELINO BAGAAN, FERDINAND BAGAAN, MAURO BAGAAN, SPOUSES
ROWENA B. LASACA and FRANCISCO LACASA,*** SPOUSES MARIA B. CABAG and
EMILIO CABAG and ESTELITA BAGAAN, all being represented herein by VICTOR
MOJELLO, FEDERICO BAGAAN and PAULINO EBARASABAL, as their Attorneys-in-
Fact, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Decision 1 and Resolution,2 dated July 11,
2007 and January 10, 2008, respectively, of the Court of Appeals (CA) in CA-G.R.
CEB-SP No. 01017.
The antecedents of the case are as follows:
On November 12, 2003, herein respondents filed against herein petitioners a
Complaint3 for Declaration of Nullity of Documents, Recovery of Shares, Partition,
Damages and Attorney's Fees. The Complaint was filed with the Regional Trial Court
(RTC) of Barili, Cebu.
On August 5, 2004, herein petitioners filed a Motion to Dismiss4 contending, among
others, that the RTC has no jurisdiction to try the case on the ground that, as the
case involves title to or possession of real property or any interest therein and since
the assessed value of the subject property does not exceed P20,000.00 (the same
being only P11,990.00), the action falls within the jurisdiction of the Municipal Trial
Court (MTC).5
In its Order6 dated September 29, 2004, the RTC granted petitioners' Motion to
Dismiss, holding as follows:
xxxx
And while the prayer of the plaintiffs for the annulment of documents qualified the
case as one incapable of pecuniary estimation thus, rendering it cognizable
supposedly by the second level courts but considering that Republic Act No. 7691
expressly provides to cover "all civil actions" which phrase understandably is to
include those incapable of pecuniary estimation, like the case at bar, this Court is of
the view that said law really finds application here more so that the same case also
"involves title to, or possession of, real property, or any interest therein." For being
so, the assessed value of the real property involved is determinative of which court
has jurisdiction over the case. And the plaintiffs admitting that the assessed value of
the litigated area is less than P20,000.00, the defendants are correct in arguing that
the case is beyond this Court's jurisdiction.7
Respondents filed a Motion for Partial Reconsideration, 8 arguing that their
complaint consists of several causes of action, including one for annulment of
documents, which is incapable of pecuniary estimation and, as such, falls within the
jurisdiction of the RTC.9
On March 17, 2005, the RTC issued an Order granting respondents' Motion for
Partial Reconsideration and reversing its earlier Order dated September 29, 2004.
The RTC ruled, thus:
On the issue of want of jurisdiction, this court likewise finds to be with merit the
contention of the movants as indeed the main case or the primary relief prayed for
by the movants is for the declaration of nullity or annulment of documents which
unquestionably is incapable of pecuniary estimation and thus within the exclusive
original jurisdiction of this court to try although in the process of resolving the
controversy, claims of title or possession of the property in question is involved
which together with all the other remaining reliefs prayed for are but purely
incidental to or as a consequence of the foregoing principal relief sought. 10
Petitioners filed a Motion for Reconsideration,11 but the RTC denied it in its Order
dated June 23, 2005.
Aggrieved, petitioners filed a petition for certiorari with the CA. However, the CA
dismissed the petition via its assailed Decision dated July 11, 2007, holding that the
subject matter of respondents' complaint is incapable of pecuniary estimation and,
therefore, within the jurisdiction of the RTC, considering that the main purpose in
filing the action is to declare null and void the documents assailed therein. 12
Petitioners' Motion for Reconsideration was, subsequently, denied in the CA
Resolution dated January 10, 2008.
Hence, the instant petition for review on certiorari raising the sole issue, to wit:
Whether or not the Honorable Court of Appeals gravely erred in concluding that the
Regional Trial Court, Branch 60 of Barili, Cebu has jurisdiction over the instant case
when the ALLEGATIONS IN THE COMPLAINT clearly shows that the main cause of
action of the respondents is for the Recovery of their Title, Interest, and Share over
a Parcel of Land, which has an assessed value of P11,990.00 and thus, within the
jurisdiction of the Municipal Trial Court.13
The petition lacks merit.
For a clearer understanding of the case, this Court, like the CA, finds it proper to
quote pertinent portions of respondents' Complaint, to wit:
xxxx
1. Plaintiffs are all Filipino, of legal age, surviving descendants – either as
grandchildren or great grandchildren – and heirs and successors-in-interest of
deceased Roman Ebarsabal, who died on 07 September 1952 x x x
xxxx
8. During the lifetime of Roman Ebarsabal, he acquired a parcel of land situated in
Basdaku, Saavedra, Moalboal, Cebu, x x x.
xxxx
with a total assessed value of P2,890.00 x x x. However, for the year 2002, the
property was already having (sic) a total assessed value of P11,990.00 x x x.
9. Upon the death of said Roman Ebarsabal, his eight (8) children named in par. 7
above, became co-owners of his above-described property by hereditary
succession; taking peaceful possession and enjoyment of the same in fee simple pro
indiviso, paying the real estate taxes thereon and did not partition the said property
among themselves until all of them likewise died, leaving, however, their respective
children and descendants and/or surviving heirs and successors-in-interest, and
who are now the above-named plaintiffs herein;
10. The plaintiffs who are mostly residents in (sic) Mindanao and Manila, have just
recently uncovered the fact that on 28th January 1997, the children and
descendants of deceased Gil Ebarsabal, namely: Pelagio, Hipolito, Precela,
Fructuosa, Roberta, Florentino, Erlinda, Sebastian, Cirilo, all surnamed Ebarsabal,
have executed among themselves a Deed of Extrajudicial Settlement with Sale of
Roman Ebarsabal's entire property described above, by virtue of which they
allegedly extrajudicially settled the same and, for P2,600,000.00 – although only the
sum of P950,000.00 was reflected in their Deed of Sale for reason only known to
them, they sold the whole property to defendants Genesis Investment Inc.
represented by co-defendant Rhodora B. Lim, the wife of Lambert Lim, without the
knowledge, permission and consent of the plaintiffs who are the vendors' co-
owners of the lot in question, x x x.
11. Surprisingly, however, the defendant Genesis managed to have the Tax
Declaration of the property issued in the name of co-defendant Cebu Jaya Realty
Incorporated, a firm which, as already intimated above, is also owned by Spouses
Lambert and Rhodora B. Lim, instead of in the name of Genesis Investment,
Incorporated, which is actually the vendee firm of the lot in question.
xxxx
Hence, the reason why Cebu Jaya Realty, Incorporated is joined and impleaded
herein as a co-defendant.
12. Without the participation of the plaintiffs who are co-owners of the lot in
question in the proceedings, the aforementioned extrajudicial settlement with sale
cannot be binding upon the plaintiff-co-owners.
13. Further, where as in this case, the other heirs who are the plaintiffs herein, did
not consent to the sale of their ideal shares in the inherited property, the sale was
only to be limited to the pro indiviso share of the selling heirs.
xxxx
14. By representation, the plaintiffs, are therefore, by law, entitled to their rightful
shares from the estate of the deceased Roman Ebarsabal consisting of seven (7)
shares that would have been due as the shares of seven (7) other children of Roman
Ebarsabal who are also now deceased, namely: Ceferino, Floro, Leona, Pedro,
Isidoro, Julian and Benito, all surnamed Ebarsabal.
15. The defendants who had prior knowledge of the existence of the other heirs
who are co-owners of the vendors of the property they purchased, had unlawfully
acted in bad faith in insisting to buy the whole property in co-ownership, only from
the heirs and successors-in-interest of deceased Gil Ebarsabal, who is only one (1)
of the eight (8) children of deceased Roman Ebarsabal, and without notifying
thereof in whatever manner the plaintiffs who are the heirs and successors-in-
interest of the other co-owners of the property-in-question; thus, have compelled
the plaintiffs herein to file this instant case in court to protect their interests, x x x.
xxxx
PRAYER
WHEREFORE, in view of all the foregoing, it is most respectfully prayed of this
Honorable Court that, after due notice and hearing, judgment shall be rendered in
favor of the plaintiffs, as follows, to wit:
1 – Declaring as null and void and not binding upon the plaintiffs, the following
documents to wit:
(a) Deed of Extrajudicial Settlement with Sale executed by and between
the heirs of deceased Gil Ebarsabal headed by Pedro Ebarsabal, and
Genesis Investment, Inc., represented by Rhodora Lim, dated 28th of
January, 1997, marked as Annex-A;
(b) Memorandum of Agreement executed between Pedro Ebarsabal and
Genesis Investment, Inc., represented by Rhodora Lim dated 27 January,
which document is notarized;
(c) Tax Declaration of Real Property issued to Cebu Jaya Realty, Inc.,
marked as Annex-D;
2 – Ordering the defendants to make partition of the property in litigation with the
plaintiffs into eight (8) equal shares; to get one (1) share thereof, which is the only
extent of what they allegedly acquired by purchase as mentioned above, and to
transfer, restore or reconvey and deliver to the plaintiffs, seven (7) shares thereof,
as pertaining to and due for the latter as the heirs and successors-in-interest of the
seven (7) brothers and sister of deceased Gil Ebarsabal already named earlier in this
complaint;
xxxx
Further reliefs and remedies just and equitable in the premises are also herein
prayed for.
x x x x14
It is true that one of the causes of action of respondents pertains to the title,
possession and interest of each of the contending parties over the contested
property, the assessed value of which falls within the jurisdiction of the MTC.
However, a complete reading of the complaint would readily show that, based on
the nature of the suit, the allegations therein, and the reliefs prayed for, the action
is within the jurisdiction of the RTC.
As stated above, it is clear from the records that respondents' complaint was for
"Declaration of Nullity of Documents, Recovery of Shares, Partition, Damages and
Attorney's Fees." In filing their Complaint with the RTC, respondents sought to
recover ownership and possession of their shares in the disputed parcel of land by
questioning the due execution and validity of the Deed of Extrajudicial Settlement
with Sale as well as the Memorandum of Agreement entered into by and between
some of their co-heirs and herein petitioners. Aside from praying that the RTC
render judgment declaring as null and void the said Deed of Extrajudicial Settlement
with Sale and Memorandum of Agreement, respondents likewise sought the
following: (1) nullification of the Tax Declarations subsequently issued in the name
of petitioner Cebu Jaya Realty, Inc.; (2) partition of the property in litigation; (3)
reconveyance of their respective shares; and (3) payment of moral and exemplary
damages, as well as attorney's fees, plus appearance fees.1âwphi1
Clearly, this is a case of joinder of causes of action which comprehends more than
the issue of partition of or recovery of shares or interest over the real property in
question but includes an action for declaration of nullity of contracts and
documents which is incapable of pecuniary estimation.15
As cited by the CA, this Court, in the case of Singson v. Isabela Sawmill, 16 held that:
In determining whether an action is one the subject matter of which is not capable
of pecuniary estimation, this Court has adopted the criterion of first ascertaining
the nature of the principal action or remedy sought. If it is primarily for the recovery
of a sum of money, the claim is considered capable of pecuniary estimation, and
whether jurisdiction is in the municipal courts or in the courts of first instance
would depend on the amount of the claim. However, where the basic issue is
something other than the right to recover a sum of money, where the money claim
is purely incidental to, or a consequence of, the principal relief sought, this Court
has considered such actions as cases where the subject of the litigation may not be
estimated in terms of money, and are cognizable by courts of first instance [now
Regional Trial Courts].17
This rule was reiterated in Russell v. Vestil18 and Social Security System v. Atlantic
Gulf and Pacific Company of Manila Inc.19
Contrary to petitioners contention, the principal relief sought by petitioners is the
nullification of the subject Extrajudicial Settlement with Sale entered into by and
between some of their co-heirs and respondents, insofar as their individual shares
in the subject property are concerned. Thus, the recovery of their undivided shares
or interest over the disputed lot, which were included in the sale, simply becomes a
necessary consequence if the above deed is nullified. Hence, since the principal
action sought in respondents Complaint is something other than the recovery of a
sum of money, the action is incapable of pecuniary estimation and, thus, cognizable
by the RTC.20 Well entrenched is the rule that jurisdiction over the subject matter of
a case is conferred by law and is determined by the allegations in the complaint and
the character of the relief sought, irrespective of whether the party is entitled to all
or some of the claims asserted.21
Moreover, it is provided under Section 5 (c), Rule 2 of the Rules of Court that where
the causes of action are between the same parties but pertain to different venues
or jurisdictions, the joinder may be allowed in the RTC provided one of the causes
of action falls within the jurisdiction of said court and the venue lies therein. Thus,
as shown above, respondents complaint clearly falls within the jurisdiction of the
RTC.
WHEREFORE, the petition is DENIED. The Decision and Resolution dated July 11,
2007 and January 10, 2008, respectively, of the Court of Appeals in CA-G.R. CEB-SP
No. 01017 are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186979 August 11, 2010
SOCORRO LIMOS, ROSA DELOS REYES and SPOUSES ROLANDO DELOS REYES and
EUGENE DELOS REYES Petitioners,
vs.
SPOUSES FRANCISCO P. ODONES and ARWENIA R. ODONES, Respondents.
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the August 14, 2008 Decision1 of the Court of Appeals (CA) in C.A. GR. SP
No. 97668 and its Resolution2 dated March 9, 2009 denying petitioners’ motion for
reconsideration.
The impugned Decision affirmed the resolution dated November 16, 20063 and
Order dated January 5, 20074 of the trial court, which respectively denied
petitioners’ Motion to Set for Preliminary Hearing the Special and Affirmative
Defenses5 and motion for reconsideration.6
The antecedents:
On June 17, 2005, private respondents-spouses Francisco Odones and Arwenia
Odones, filed a complaint for Annulment of Deed, Title and Damages against
petitioners Socorro Limos, Rosa Delos Reyes and Spouses Rolando Delos Reyes and
Eugene Delos Reyes, docketed as Civil Case No. 05-33 before the Regional Trial
Court (RTC) of Camiling, Tarlac, Branch 68.
The complaint alleged that spouses Odones are the owners of a 940- square meter
parcel of land located at Pao 1st, Camiling, Tarlac by virtue of an Extrajudicial
Succession of Estate and Sale dated, January 29, 2004, executed by the surviving
grandchildren and heirs of Donata Lardizabal in whom the original title to the land
was registered. These heirs were Soledad Razalan Lagasca, Ceferina Razalan Cativo,
Rogelio Lagasca Razalan and Dominador Razalan.
It took a while before respondents decided to register the document of
conveyance; and when they did, they found out that the land’s Original Certificate
of Title (OCT) was cancelled on April 27, 2005 and replaced by Transfer Certificate of
Title (TCT) No. 329427 in the name of herein petitioners.
Petitioners were able to secure TCT No. 329427 by virtue of a Deed of Absolute Sale
allegedly executed by Donata Lardizabal and her husband Francisco Razalan on April
18, 1972.
Petitioners then subdivided the lot among themselves and had TCT No. 329427
cancelled. In lieu thereof, three new TCTs were issued: TCT No. 392428 in the
names of Socorro Limos and spouses Rolando Delos Reyes and Eugene Delos Reyes,
TCT No. 392429 in the names of Spouses delos Reyes and TCT No. 392430 in the
name of Rosa Delos Reyes.
Respondents sought the cancellation of these new TCTs on the ground that the
signatures of Donata Lardizabal and Francisco Razalan in the 1972 Deed of Absolute
Sale were forgeries, because they died on June 30, 1926 and June 5, 1971,
respectively.7
In response, petitioners filed a Motion for Bill of Particulars 8 claiming ambiguity in
respondents’ claim that their vendors are the only heirs of Donata Lardizabal.
Finding no merit in the motion, the trial court denied the same and ordered
petitioners to file their answer to the complaint.9
In their answer,10 petitioners pleaded affirmative defenses, which also constitute
grounds for dismissal of the complaint. These grounds were: (1) failure to state a
cause of action inasmuch as the basis of respondents’ alleged title is void, since the
Extrajudicial Succession of Estate and Sale was not published and it contained
formal defects, the vendors are not the legal heirs of Donata Lardizabal, and
respondents are not the real parties-in-interest to question the title of petitioners,
because no transaction ever occurred between them; (2) non-joinder of the other
heirs of Donata Lardizabal as indispensable parties; and (3) respondents’ claim is
barred by laches.
In their Reply, respondents denied the foregoing affirmative defenses, and insisted
that the Extrajudicial Succession of Estate and Sale was valid. They maintained their
standing as owners of the subject parcel of land and the nullity of the 1972
Absolute Deed of Sale, upon which respondents anchor their purported title. 11 They
appended the sworn statement of Amadeo Razalan declaring, among other things
that:
(2) Na hindi ko minana at ibinenta ang nasabing lupa kay Socorro Limos at
Rosa delos Reyes at hindi totoo na ako lang ang tagapagmana ni Donata
Lardizabal;
xxxx
(4) Ang aming lola na si Donata Lardizabal ay may tatlong (3) anak na patay
na sina Tomas Razalan, Clemente Razalan at Tomasa Razalan;
(5) Ang mga buhay na anak ni Tomas Razalan ay sina; 1. Soledad Razalan;
2. Ceferina Razalan; 3. Dominador Razalan; at 4. Amadeo Razalan. Ang mga
buhay na anak ni Clemente Razalan ay sina 1. Rogelio Lagasca (isang
abnormal). Ang mga buhay na anak ni Tomasa Razalan ay sina 1. Sotera
Razalan at 2 pang kapatid;
x x x x12
Thereafter, petitioners served upon respondents a Request for Admission of the
following matters:
1. That the husband of the deceased Donata Lardizabal is Francisco
Razalan;
 2. That the children of the deceased Sps. Donata Lardizabal and Francisco
Razalan are Mercedes Razalan, Tomasa Razalan and Tomas Razalan;
3. That this Tomasa Razalan died on April 27, 1997, if not when? [A]nd her
heirs are (a) Melecio Partido surviving husband, and her surviving children
are (b) Eduardo Partido married to Elisa Filiana, (c) Enrique Razalan Partido
married to Lorlita Loriana, (d) Eduardo Razalan Partido, (e) Sotera Razalan
Partido married to James Dil-is and (f) Raymundo Razalan Partido married
to Nemesia Aczuara, and all residents of Camiling, Tarlac.
4. That Amadeo Razalan is claiming also to be a grandchild and also
claiming to be sole forced heir of Donata Lardizabal pursuant to the
Succession by a Sole Heir with Sale dated January 24, 2000, executed
before Atty. Rodolfo V. Robinos.
5. That Amadeo Razalan is not among those who signed the Extra[j]udicial
Succession of Estate and Sale dated January 29, 2004 allegedly executed in
favor of the plaintiffs, Sps. Francisco/Arwenia Odones;
6. That as per Sinumpaang Salaysay of Amadeo Razalan which was
submitted by the plaintiffs, the children of Tomasa Razalan are Sotera
Razalan and 2 brothers/sisters. These children of Tomasa Razalan did not
also sign the Extra[j]udicial Succession of Estate and Sale;
7. That there is/are no heirs of Clemente Razalan who appeared to have
executed the Extra[j]udicial Succession of Estate and Sale;
8. That Soledad Razalan Lagasca, Ceferina Razalan Cativo, Rogelio Lagasca
Razalan and Dominador Razalan did not file any letters (sic) of
administration nor declaration of heirship before executing the alleged
Extra[j]udicial Succession of Estate and Sale in favor of plaintiffs.13
Respondents failed to respond to the Request for Admission, prompting petitioners
to file a Motion to Set for Preliminary Hearing on the Special and Affirmative
Defenses,14 arguing that respondents’ failure to respond or object to the Request
for Admission amounted to an implied admission pursuant to Section 2 of Rule 26
of the Rules of Court. As such, a hearing on the affirmative defenses had become
imperative because petitioners were no longer required to present evidence on the
admitted facts.
Respondents filed a comment on the Motion, contending that the facts sought to
be admitted by petitioners were not material and relevant to the issue of the case
as required by Rule 26 of the Rules of Court. Respondents emphasized that the only
attendant issue was whether the 1972 Deed of Absolute Sale upon which
petitioners base their TCTs is valid.15
In its Resolution dated November 16, 2006, the RTC denied the Motion and held
that item nos. 1 to 4 in the Request for Admission were earlier pleaded as
affirmative defenses in petitioners’ Answer, to which respondents already replied
on July 17, 2006. Hence, it would be redundant for respondents to make another
denial. The trial court further observed that item nos. 5, 6, and 7 in the Request for
Admission were already effectively denied by the Extrajudicial Succession of Estate
and Sale appended to the complaint and by the Sinumpaang Salaysay of Amadeo
Razalan attached to respondents’ Reply.16 Petitioners moved for
reconsideration17 but the same was denied in an Order dated January 5, 2007.18
Petitioners elevated this incident to the CA by way of a special civil action for
certiorari, alleging grave abuse of discretion on the part of the RTC in issuing the
impugned resolution and order.
On August 14, 2008, the CA dismissed the petition ruling that the affirmative
defenses raised by petitioners were not indubitable, and could be best proven in a
full-blown hearing.19
Their motion for reconsideration20 having been denied,21 petitioners are now
before this Court seeking a review of the CA’s pronouncements.
In essence, petitioners contend that the affirmative defenses raised in their Motion
are indubitable, as they were impliedly admitted by respondents when they failed
to respond to the Request for Admission. As such, a preliminary hearing on the said
affirmative defenses must be conducted pursuant to our ruling in Gochan v.
Gochan.22
We deny the petition.
Pertinent to the present controversy are the rules on modes of discovery set forth
in Sections 1 and 2 of Rule 26 of the Rules of Court, viz:
Section 1. Request for admission. – At any time after issues have been joined, a
party may file and serve upon any other party a written request for the admission
by the latter of the genuineness of any material and relevant document described
in and exhibited with the request or of the truth of any material and relevant
matter of fact set forth in the request. Copies of the documents shall be delivered
with the request unless copies have already been furnished.
SEC. 2 Implied admission. – Each of the matters of which an admission is requested
shall be deemed admitted unless, within a period designated in the request, which
shall be not less than fifteen (15) days after service thereof, or within such further
time as the court may allow on motion, the party to whom the request is directed
files and serves upon the party requesting the admission a sworn statement either
denying specifically the matters for which an admission is requested or setting forth
in detail the reasons why he cannot truthfully either admit or deny those matters.
xxxx
Under these rules, a party who fails to respond to a Request for Admission shall be
deemed to have impliedly admitted all the matters contained therein. It must be
emphasized, however, that the application of the rules on modes of discovery rests
upon the sound discretion of the court.
As such, it is the duty of the courts to examine thoroughly the circumstances of
each case and to determine the applicability of the modes of discovery, bearing
always in mind the aim to attain an expeditious administration of justice. 23
The determination of the sanction to be imposed upon a party who fails to comply
with the modes of discovery also rests on sound judicial discretion. 24 Corollarily, this
discretion carries with it the determination of whether or not to impose the
sanctions attributable to such fault.
As correctly observed by the trial court, the matters set forth in petitioners’ Request
for Admission were the same affirmative defenses pleaded in their Answer which
respondents already traversed in their Reply. The said defenses were likewise
sufficiently controverted in the complaint and its annexes. In effect, petitioners
sought to compel respondents to deny once again the very matters they had
already denied, a redundancy, which if abetted, will serve no purpose but to delay
the proceedings and thus defeat the purpose of the rule on admission as a mode of
discovery which is "to expedite trial and relieve parties of the costs of proving facts
which will not be disputed on trial and the truth of which can be ascertained by
reasonable inquiry."25
A request for admission is not intended to merely reproduce or reiterate the
allegations of the requesting party’s pleading but should set forth relevant
evidentiary matters of fact described in the request, whose
purpose is to establish said party’s cause of action or defense. Unless it serves that
purpose, it is pointless, useless, and a mere redundancy. 26
Verily then, if the trial court finds that the matters in a Request for Admission were
already admitted or denied in previous pleadings by the requested party, the latter
cannot be compelled to admit or deny them anew. In turn, the requesting party
cannot reasonably expect a response to the request and thereafter, assume or even
demand the application of the implied admission rule in Section 2, Rule 26.
In this case, the redundant and unnecessarily vexatious nature of petitioners’
Request for Admission rendered it ineffectual, futile, and irrelevant so as to
proscribe the operation of the implied admission rule in Section 2, Rule 26 of the
Rules of Court. There being no implied admission attributable to respondents’
failure to respond, the argument that a preliminary hearing is imperative loses its
point.
Moreover, jurisprudence27 has always been firm and constant in declaring that
when the affirmative defense raised is failure to state a cause of action, a
preliminary hearing thereon is unnecessary, erroneous, and improvident.
In any event, a perusal of respondents’ complaint shows that it was sufficiently
clothed with a cause of action and they were suited to file the same.
In an action for annulment of title, the complaint must contain the following
allegations: (1) that the contested land was privately owned by the plaintiff prior to
the issuance of the assailed certificate of title to the defendant; and (2) that the
defendant perpetuated a fraud or committed a mistake in obtaining a document of
title over the parcel of land claimed by the plaintiff.28
Such action goes into the issue of ownership of the land covered by a Torrens title,
hence, the relief generally prayed for by the plaintiff is to be declared as the land’s
true owner.29 Thus, the real party-in-interest is the person claiming title or
ownership adverse to that of the registered owner.30
The herein complaint alleged: (1) that respondents are the owners and occupants of
a parcel of land located at Pao 1st Camiling, Tarlac, covered by OCT No. 11560 in
the name of Donata Lardizabal by virtue of an Extrajudicial Succession of Estate and
Sale; and (2) that petitioners fraudulently caused the cancellation of OCT No. 11560
and the issuance of new TCTs in their names by presenting a Deed of Absolute Sale
with the forged signatures of Donata Lardizabal and her husband, Francisco
Razalan.
The absence of any transaction between petitioners and respondents over the land
is of no moment, as the thrust of the controversy is the respondents’ adverse claims
of rightful title and ownership over the same property, which arose precisely
because of the conflicting sources of their respective claims.
As to the validity of the Extrajudicial Succession of Estate and Sale and the status of
petitioners’ predecessors-in-interest as the only heirs of Donata Lardizabal, these
issues go into the merits of the parties’ respective claims and defenses that can be
best determined on the basis of preponderance of the evidence they will adduce in
a full-blown trial. A preliminary hearing, the objective of which is for the court to
determine whether or not the case should proceed to trial, will not sufficiently
address such issues.
Anent the alleged non-joinder of indispensable parties, it is settled that the non-
joinder of indispensable parties is not a ground for the dismissal of an action. The
remedy is to implead the non-party claimed to be indispensable. Parties may be
added by order of the court on motion of the party or on its own initiative at any
stage of the action and/or such times as are just. It is only when the plaintiff refuses
to implead an indispensable party despite the order of the court, that the latter
may dismiss the complaint.31 In this case, no such order was issued by the trial
court.1awphi1
Equally settled is the fact that laches is evidentiary in nature and it may not be
established by mere allegations in the pleadings and can not be resolved in a
motion to dismiss.32
Finally, we cannot subscribe to petitioners’ contention that the status of the heirs of
Donata Lardizabal who sold the property to the respondents must first be
established in a special proceeding. The pronouncements in Heirs of Yaptinchay v.
Hon. Del Rosario33 and in Reyes v. Enriquez34 that the petitioners invoke do not find
application in the present controversy.
In both cases, this Court held that the declaration of heirship can be made only in a
special proceeding and not in a civil action. It must be noted that in Yaptinchay and
Enriquez, plaintiffs’ action for annulment of title was anchored on their alleged
status as heirs of the original owner whereas in this case, the respondents’ claim is
rooted on a sale transaction. Respondents herein are enforcing their rights as
buyers in good faith and for value of the subject land and not as heirs of the original
owner. Unlike in Yaptinchay and Enriquez, the filiation of herein respondents to the
original owner is not determinative of their right to claim title to and ownership of
the property.
WHEREFORE, foregoing considered, the instant Petition is DENIED. The Decision of
the Court of Appeals dated August 14, 2008 and its Resolution dated March 9, 2009
are hereby AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178611 January 14, 2013
ESTRELLA ADUAN ORPIANO, Petitioner,
vs.
SPOUSES ANTONIO C. TOMAS and MYRNA U. TOMAS, Respondents.
DECISION
DEL CASTILLO, J.:
Considerations of expediency cannot justify a resort to procedural shortcuts. The
end does not justify the means; a meritorious case cannot overshadow the
condition that the means employed to pursue it must be in keeping with the Rules.
Assailed in this Petition for Review on Certiorari1 are the May 7, 2007 Decision2 of
the Court of Appeals (CA) which dismissed the petition in CA-G.R. SP No. 97341, and
its June 28, 2007 Resolution3 denying petitioner's motion for reconsideration.
Factual Antecedents
Petitioner Estrella Aduan Orpiano (Estrella) is the widow of Alejandro Orpiano
(Alejandro). Part of their conjugal estate is an 809.5-square meter lot in Quezon City
covered by Transfer Certificate of Title (TCT) No. RT-23468 (the lot).
In 1979, a Decision was rendered by the defunct Juvenile and Domestic Relations
Court (JDRC) of Quezon City declaring Estrella an absent/absentee spouse and
granting Alejandro the authority to sell the lot. The JDRC Decision was annotated on
the back of TCT No. RT-23468.
On March 19, 1996, Alejandro sold the lot on installment basis to respondent
spouses Antonio and Myrna Tomas (the Tomas spouses) for P12,170,283.00. That
very same day, a new title – TCT No. N-152326 – was issued in the name of the
Tomas spouses despite the fact that the purchase price has not been paid in full,
the spouses having been given until December of that same year to complete their
payment.
On October 28, 1996, Alejandro filed Civil Case No. Q-96-29261 (the collection case)
in the Regional Trial Court (RTC) of Quezon City, Branch 226 (the collection court),
seeking collection of the balance of the price in the amount of P4,314,100.00
supposedly left unpaid by the Tomas spouses, with damages.[4]
During the pendency of the collection case, Alejandro passed away. His heirs,
Estrella included, were substituted in his stead in the collection case. Estrella moved
to amend the Complaint to one for rescission/annulment of sale and cancellation of
title, but the court denied her motion. She next moved to be dropped as party
plaintiff but was again rebuffed.
On June 11, 2005, Estrella filed Civil Case No. Q-05-56216 (the annulment case) for
annulment of the March 1996 sale and cancellation of TCT No. N-152326, with
damages, against the Tomas spouses and the Register of Deeds of Quezon City
which was impleaded as a nominal party.5 The case was raffled to Branch 97 of the
Quezon City RTC (the annulment court). In her Complaint, Estrella claimed that the
1979 declaration of her absence and accompanying authority to sell the lot were
obtained by Alejandro through misrepresentation, fraud and deceit, adding that the
May 1979 JDRC Decision was not published as required by law and by the domestic
relations court. Thus, the declaration of absence and Alejandro’s authority to sell
the lot are null and void. Correspondingly, the ensuing sale to the Tomas spouses
should be voided, and TCT No. N-152326 cancelled.
In their Answer to the annulment Complaint, the Tomas spouses prayed for the
dismissal thereof on the ground of forum shopping, arguing that the filing of the
annulment case was prompted by the denial of Estrella’s motion initiated in the
collection case to amend the Complaint to one for annulment of sale. The
annulment case is Estrella’s attempt at securing a remedy which she could not
obtain in the collection case. The Tomas spouses added that the dismissal of the
annulment case would preclude the possibility that the two courts might render
conflicting decisions.
After pre-trial in the annulment case, the court proceeded to tackle the issue of
forum shopping. The parties submitted their respective memoranda touching on
the sole issue of whether Estrella is guilty of forum shopping.
Ruling of the Regional Trial Court
On September 25, 2006, the trial court issued an Order 6 dismissing the annulment
case. It sustained the view taken by the Tomas spouses that Estrella filed the
annulment case only because the collection court denied her motion to amend the
case to one for annulment of the sale, and thus the annulment case was Estrella’s
attempt at obtaining a remedy which she could not secure in the collection case. It
added that because the two cases involve the same subject matter, issues, and
parties, there indeed is a possibility that conflicting decisions could be rendered by
it and the collection court, the possibility made even greater because the two cases
involve antithetical remedies.
Estrella moved for reconsideration but the court was unmoved.
Ruling of the Court of Appeals
On December 27, 2006, Estrella filed with the CA a Petition for
Certiorari7 questioning the September 25, 2006 Order of the annulment court. The
appellate court, however, could not be persuaded. Finding no grave abuse of
discretion in the annulment court's dismissal of the annulment case, the CA found
that Estrella was indeed guilty of forum shopping in filing the annulment suit while
the collection case was pending. Applying the test articulated in a multitude of
decided cases – that where a final judgment in one case will amount to res judicata
in another – it follows that there is forum shopping. The CA held that a final
judgment in the collection case ordering the Tomas spouses to pay the supposed
balance of the price will necessarily result in a finding that the sale between
Alejandro and the Tomas spouses is a valid sale. This then would prevent a
declaration of nullity of the sale in the annulment case.
Accordingly, the CA dismissed Estrella’s Petition for Certiorari. Her Motion for
Reconsideration was likewise denied, hence the present Petition.
Issue
The sole issue to be resolved in this case is whether there is indeed forum shopping.
Petitioner’s Arguments
Estrella argues that it was Alejandro and not she who initiated the collection case,
and that she, their two children, and Alejandro’s four illegitimate children were
merely substituted in the case as his heirs by operation of law; thus, she should not
be bound by the collection case. She claims that in the first place, she was not privy
to Alejandro’s sale of the lot to the Tomas spouses. Having been unwillingly
substituted in the collection case, she forthwith moved to amend the Complaint in
order to include, as one of the remedies sought therein, annulment of the sale
insofar as her conjugal share in the lot is concerned. But the court denied her
motion. Next, she moved to be dropped or stricken out as plaintiff to the collection
case, but again, the trial court rebuffed her.
Estrella maintains that on account of these repeated denials, she was left with no
other alternative but to institute the annulment case. She claims that since the
collection case does not further her interest — which is to seek annulment of the
sale and recover her conjugal share — and the collection court would not grant her
motions to amend and to be dropped or stricken out as party plaintiff therein, she
thus has a right to maintain a suit to have the sale annulled. It is therefore
erroneous for the CA to state that she initiated the annulment suit only for the
purpose of obtaining a favorable ruling in said court, which she could not achieve in
the collection court.
She further adds that there is obviously no identity of parties, cause of action, or
reliefs prayed for between the collection and annulment cases; the two involve
absolutely opposite reliefs. She stresses the fact that she is seeking annulment of
the sale with respect only to her conjugal share, and not those of her co-heirs.
Respondents’ Arguments
The Tomas spouses, apart from echoing the trial court and the CA, emphasize that
the rule prohibiting forum shopping precisely seeks to avoid the situation where the
two courts – the collection court and the annulment court – might render two
separate and contradictory decisions. If the annulment case is allowed to proceed,
then it could result in a judgment declaring the sale null and void, just as a decision
in the collection case could be issued ordering them to pay the balance of the price,
which is tantamount to a declaration that the sale is valid.
They add that Estrella could no longer question the 1979 JDRC Decision, having
failed to challenge the same immediately upon obtaining notice thereof; she did not
even bother to have her declaration of absence lifted. They claim that after the
lapse of 26 years, prescription has finally set in. They likewise argue that if both
cases are allowed to remain pending, a ridiculous situation could arise where, after
having paid the balance as ordered by the collection court, they could lose not only
the lot but also their payments in case a decision in the annulment court is
rendered nullifying and canceling the sale and ordering the return of the lot to
Alejandro’s heirs, Estrella included.
Our Ruling
The petition must be denied.
"Forum shopping is defined as an act of a party, against whom an adverse judgment
or order has been rendered in one forum, of seeking and possibly getting a
favorable opinion in another forum, other than by appeal or special civil action for
certiorari. It may also be the institution of two or more actions or proceedings
grounded on the same cause on the supposition that one or the other court would
make a favorable disposition. x x x It is expressly prohibited x x x because it trifles
with and abuses court processes, degrades the administration of justice, and
congests court dockets. A willful and deliberate violation of the rule against forum
shopping is a ground for summary dismissal of the case, and may also constitute
direct contempt."8
Although the Court believes that Estrella was not prompted by a desire to trifle with
judicial processes, and was acting in good faith in initiating the annulment case, still
the said case should be dismissed because it produces the same effect which the
rule on forum shopping was fashioned to preclude. If the collection case is not
dismissed and it, together with the annulment case, proceeds to finality, not only
do we have a possibility of conflicting decisions being rendered; an unfair situation,
as envisioned by the Tomas spouses, might arise where after having paid the
balance of the price as ordered by the collection court, the cancellation of the TCT
and return of the property could be decreed by the annulment court. Besides,
allowing the two cases to remain pending makes litigation simply a game of chance
where parties may hedge their position by betting on both sides of the case, or by
filing several cases involving the same issue, subject matter, and parties, in the
hope of securing victory in at least one of them. But, as is already well known, the
"trek to justice is not a game of chance or skill but rather a quest for truth x x x." 9
Moreover, allowing Estrella to proceed with the annulment case while the
collection case is still pending is like saying that she may accept the deed of sale and
question it at the same time. For this is the necessary import of the two pending
cases: joining as plaintiff in the collection case implies approval of the deed, while
suing to declare it null and void in the annulment court entails a denunciation
thereof. This may not be done. "A person cannot accept and reject the same
instrument"10 at the same time. It must be remembered that "the absence of the
consent of one (spouse to a sale) renders the entire sale null and void, including the
portion of the conjugal property pertaining to the spouse who contracted the
sale."11
The Court realizes the quandary that Estrella — motivated by the solitary desire to
protect her conjugal share in the lot from what she believes was Alejandro’s undue
interference in disposing the same without her knowledge and consent — finds
herself in. While raring to file the annulment case, she has to first cause the
dismissal of the collection case because she was by necessity substituted therein by
virtue of her being Alejandro’s heir; but the collection court nonetheless blocked all
her attempts toward such end. The collection court failed to comprehend her
predicament, her need to be dropped as party to the collection case in order to
pursue the annulment of the sale.
As plaintiff in the collection case, Estrella – though merely succeeding to Alejandro’s
rights – was an indispensable party, or one without whom no final determination
can be had in the collection case.12 Strictly, she may not be dropped from the case.
However, because of her dual identity, first as heir and second as owner of her
conjugal share, she has been placed in the unique position where she has to
succeed to her husband’s rights, even as she must protect her separate conjugal
share from Alejandro’s perceived undue disposition. She may not seek to amend
the cause of action in the collection case to one for annulment of sale, because this
adversely affects the interests of her co-heirs, which is precisely to obtain payment
of the supposed balance of the sale price.
Nor may Estrella simultaneously maintain the two actions in both capacities, as heir
in the collection case and as separate owner of her conjugal share in the annulment
case. This may not be done, because, as was earlier on declared, this amounts to
simultaneously accepting and rejecting the same deed of sale. Nor is it possible to
prosecute the annulment case simultaneously with the collection case, on the
premise that what is merely being annulled is the sale by Alejandro of Estrella’s
conjugal share. To repeat, the absence of the consent of one spouse to a sale
renders the entire sale null and void, including the portion of the conjugal property
pertaining to the spouse who contracted the sale.
Undoubtedly, Estrella had the right to maintain the annulment case as a measure of
protecting her conjugal share. There thus exists a just cause for her to be dropped
as party plaintiff in the collection case so that she may institute and maintain the
annulment case without violating the rule against forum shopping. Unless this is
done, she stands to lose her share in the conjugal property. But the issue of
whether the sale should be annulled is a different matter altogether.1âwphi1
Under the Rules, parties may be dropped or added by order of the court on motion
of any party or on its own initiative at any stage of the action and on such terms as
are just.13 Indeed, it would have been just for the collection court to have allowed
Estrella to prosecute her annulment case by dropping her as a party plaintiff in the
collection case, not only so that she could protect her conjugal share, but also to
prevent the interests of her co-plaintiffs from being adversely affected by her
conflicting actions in the same case. By seeking to be dropped from the collection
case, Estrella was foregoing collection of her share in the amount that may be due
and owing from the sale. It does not imply a waiver in any manner that affects the
rights of the other heirs.
While Estrella correctly made use of the remedies available to her – amending the
Complaint and filing a motion to drop her as a party – she committed a mistake in
proceeding to file the annulment case directly after these remedies were denied
her by the collection court without first questioning or addressing the propriety of
these denials. While she may have been frustrated by the collection court’s
repeated rejection of her motions and its apparent inability to appreciate her plight,
her proper recourse nevertheless should have been to file a petition for certiorari or
otherwise question the trial court’s denial of her motion to be dropped as plaintiff,
citing just reasons which call for a ruling to the contrary. Issues arising from joinder
or misjoinder of parties are the proper subject of certiorari. 14
In fine, we reiterate that considerations of expediency cannot justify a resort to
procedural shortcuts. The end does not justify the means; a meritorious case
cannot overshadow the condition that the means employed to pursue it must be in
keeping with the Rules.
WHEREFORE, premises considered, the Petition is DENIED for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178607 December 5, 2012
DANTE LA. JIMENEZ, in his capacity as President and representative of UNLAD
SHIPPING & MANAGEMENT CORPORATION, Petitioner,
vs.
HON. EDWIN SORONGON (in his capacity as Presiding Judge of Branch 214 of the
Regional Trial Court of Mandaluyong City), SOCRATES ANTZOULATOS, CARMEN
ALAMIL, MARCELl GAZA and MARKOS AVGOUSTIS, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari[ 1] filed by Dante La.
Jimenez (petitioner) to challenge the twin resolutions of the Court of Appeals
( CA) dated November 23, 20062 and June 28, 20073 in CA-G.R. SP No. 96584, which
dismissed the petitioner's petition for certiorari and denied his motion for
reconsideration, respectively.
The Factual Antecedents
The petitioner is the president of Unlad Shipping & Management Corporation, a
local manning agency, while Socrates Antzoulatos, Carmen Alamil, Marceli Gaza,
and Markos Avgoustis (respondents) are some of the listed incorporators of Tsakos
Maritime Services, Inc. (TMSI), another local manning agency.
On August 19, 2003, the petitioner filed a complaint-affidavit4 with the Office of the
City Prosecutor of Mandaluyong City against the respondents for syndicated and
large scale illegal recruitment.5 The petitioner alleged that the respondents falsely
represented their stockholdings in TMSI’s articles of incorporation6 to secure a
license to operate as a recruitment agency from the Philippine Overseas
Employment Agency (POEA).
On October 9, 2003, respondents Antzoulatos and Gaza filed their joint counter-
affidavit denying the complaint-affidavit’s allegations.7 Respondents Avgoustis and
Alamil did not submit any counter-affidavit.
8
In a May 4, 2004 resolution, the 3rd Assistant City Prosecutor recommended the
filing of an information for syndicated and large scale illegal recruitment against the
respondents. The City Prosecutor approved his recommendation and filed the
corresponding criminal information with the Regional Trial Court (RTC) of
Mandaluyong City (docketed as Criminal Case No. MC04-8514 and raffled to Branch
212) presided by Judge Rizalina T. Capco-Umali.
Subsequently, in a December 14, 2004 resolution, the City Prosecutor reconsidered
the May 4, 2004 resolution and filed a motion with the RTC to withdraw the
information.9 The petitioner and respondents Antzoulatos and Gaza filed their
opposition10 and comment to the opposition, respectively.
In an August 1, 2005 resolution,11 the RTC denied the motion to withdraw
information as it found the existence of probable cause to hold the respondents for
trial.12 Thus, the RTC ordered the issuance of warrants of arrest against the
respondents.
On August 26, 2005, respondents Antzoulatos and Gaza filed an omnibus motion for
reconsideration and for deferred enforcement of the warrants of arrest. 13 In a
September 2, 2005 order,14 the RTC denied the omnibus motion, reiterating that
the trial court is the sole judge on whether a criminal case should be dismissed or
not.
On September 26, 2005, respondent Alamil filed a motion for judicial determination
of probable cause with a request to defer enforcement of the warrants of arrest. 15
On September 29, 2005, the petitioner filed his opposition with motion to expunge,
contending that respondent Alamil, being a fugitive from justice, had no standing to
seek any relief and that the RTC, in the August 1, 2005 resolution, already found
probable cause to hold the respondents for trial.16
In a September 30, 2005 order,17 the RTC denied respondent Alamil’s motion for
being moot and academic; it ruled that it had already found probable cause against
the respondents in the August 1, 2005 resolution, which it affirmed in the
September 2, 2005 order.
On October 10, 2005, respondent Alamil moved for reconsideration and for the
inhibition of Judge Capco-Umali, for being biased or partial.18 On October 25, 2005,
the petitioner filed an opposition with a motion to expunge, reiterating that
respondent Alamil had no standing to seek relief from the RTC. 19
In a January 4, 2006 order,20 Judge Capco-Umali voluntarily inhibited herself from
the case and did not resolve respondent Alamil’s motion for reconsideration and
the petitioner’s motion to expunge. The case was later re-raffled to Branch 214,
presided by Judge Edwin D. Sorongon.
The RTC Rulings
In its March 8, 2006 order,21 the RTC granted respondent Alamil’s motion for
reconsideration. It treated respondent Alamil’s motion for judicial determination as
a motion to dismiss for lack of probable cause. It found: (1) no evidence on record
to indicate that the respondents gave any false information to secure a license to
operate as a recruitment agency from the POEA; and (2) that respondent Alamil
voluntarily submitted to the RTC’s jurisdiction through the filing of pleadings
seeking affirmative relief. Thus, the RTC dismissed the case, and set aside the earlier
issued warrants of arrest.
On April 3, 2006, the petitioner moved for reconsideration, stressing the existence
of probable cause to prosecute the respondents and that respondent Alamil had no
standing to seek any relief from the RTC.22
On April 26, 2006, respondent Alamil moved to expunge the motion for being a
prohibited pleading since the motion did not have the public prosecutor’s
conformity.23
In its May 10, 2006 order,24 the RTC denied the petitioner’s motion for
reconsideration, finding that the petitioner merely reiterated arguments in issues
that had been finally decided. The RTC ordered the motion expunged from the
records since the motion did not have the public prosecutor’s conformity.
On May 19, 2006, the petitioner filed a notice of appeal.25
On May 30, 2006, respondent Alamil moved to expunge the petitioner’s notice of
appeal since the public prosecutor did not authorize the appeal and the petitioner
had no civil interest in the case.26
On June 27, 2006, the petitioner filed his comment to the motion to expunge,
claiming that, as the offended party, he has the right to appeal the RTC order
dismissing the case; the respondents’ fraudulent acts in forming TMSI greatly
prejudiced him.27
In its August 7, 2006 joint order,28 the RTC denied the petitioner’s notice of appeal
since the petitioner filed it without the conformity of the Solicitor General, who is
mandated to represent the People of the Philippines in criminal actions appealed to
the CA. Thus, the RTC ordered the notice of appeal expunged from the records.
On October 18, 2006, the petitioner elevated his case to the CA via a Rule 65
petition for certiorari assailing the RTC’s March 8, 2006, May 10, 2006, and August
7, 2006 orders.
The CA Ruling
In its November 23, 2006 resolution,29 the CA dismissed outright the petitioner’s
Rule 65 petition for lack of legal personality to file the petition on behalf of the
People of the Philippines. It noted that only the Office of the Solicitor General (OSG)
has the legal personality to represent the People, under Section 35(1), Chapter 12,
Title III, Book IV of the 1987 Administrative Code. It also held that the petitioner
was not the real party in interest to institute the case, him not being a victim of the
crime charged to the respondents, but a mere competitor in their recruitment
business. The CA denied30 the motion for reconsideration31 that followed.
The Petition
The petitioner argues that he has a legal standing to assail the dismissal of the
criminal case since he is the private complainant and a real party in interest who
had been directly damaged and prejudiced by the respondents’ illegal acts;
respondent Alamil has no legal standing to seek any relief from the RTC since she is
a fugitive from justice.
The Case for the Respondents
The respondents32 submit that the petitioner lacks a legal standing to assail the
dismissal of the criminal case since the power to prosecute lies solely with the
State, acting through a public prosecutor; the petitioner acted independently and
without the authority of a public prosecutor in the prosecution and appeal of the
case.
The Issue
The case presents to us the issue of whether the CA committed a reversible error in
dismissing outright the petitioner’s Rule 65 petition for certiorari for lack of legal
personality to file the petition on behalf of the People of the Philippines.
Our Ruling
The petition lacks merit.
The petitioner has no legal personality to assail the dismissal of the criminal case
It is well-settled that "every action must be prosecuted or defended in the name of
the real party in interest[,]" "who stands to be benefited or injured by the judgment
in the suit, or by the party entitled to the avails of the suit." 33Interest means
material interest or an interest in issue to be affected by the decree or judgment of
the case, as distinguished from mere interest in the question involved. 34 By real
interest is meant a present substantial interest, as distinguished from a mere
expectancy, or a future, contingent, subordinate or consequential interest.35 When
the plaintiff or the defendant is not a real party in interest, the suit is dismissible. 36
Procedural law basically mandates that "[a]ll criminal actions commenced by
complaint or by information shall be prosecuted under the direction and control of
a public prosecutor."37 In appeals of criminal cases before the CA and before this
Court, the OSG is the appellate counsel of the People, pursuant to Section 35(1),
Chapter 12, Title III, Book IV of the 1987 Administrative Code. This section explicitly
provides:
SEC. 35. Powers and Functions. — The Office of the Solicitor General shall represent
the Government of the Philippines, its agencies and instrumentalities and its
officials and agents in any litigation, proceeding, investigation or matter requiring
the services of lawyers. . . . It shall have the following specific powers and functions:
(1) Represent the Government in the Supreme Court and the Court of Appeals in
all criminal proceedings; represent the Government and its officers in the Supreme
Court and Court of Appeals, and all other courts or tribunals in all civil actions and
special proceedings in which the Government or any officer thereof in his official
capacity is a party. (emphasis added)
The People is the real party in interest in a criminal case and only the OSG can
represent the People in criminal proceedings pending in the CA or in this Court. This
ruling has been repeatedly stressed in several cases38 and continues to be the
controlling doctrine.
While there may be rare occasions when the offended party may be allowed to
pursue the criminal action on his own behalf39 (as when there is a denial of due
process), this exceptional circumstance does not apply in the present case.
In this case, the petitioner has no legal personality to assail the dismissal of the
criminal case since the main issue raised by the petitioner involved the criminal
aspect of the case, i.e., the existence of probable cause. The petitioner did not
appeal to protect his alleged pecuniary interest as an offended party of the crime,
but to cause the reinstatement of the criminal action against the respondents. This
involves the right to prosecute which pertains exclusively to the People, as
represented by the OSG.40
Respondent Alamil voluntarily submitted to the RTC’s jurisdiction
As a rule, one who seeks an affirmative relief is deemed to have submitted to the
jurisdiction of the court. Filing pleadings seeking affirmative relief constitutes
voluntary appearance, and the consequent jurisdiction of one's person to the
jurisdiction of the court.41
Thus, by filing several motions before the RTC seeking the dismissal of the criminal
case, respondent Alamil voluntarily submitted to the jurisdiction of the RTC.
Custody of the law is not required for the adjudication of reliefs other than an
application for bail.42
WHEREFORE, we hereby DENY the appeal. The twin resolutions of the CoUJt of
Appeals dated November 23, 2006 and June 28, 2007 in CAG. R. SP No. 96584
are AFFIRMED. Costs against the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178607 December 5, 2012
DANTE LA. JIMENEZ, in his capacity as President and representative of UNLAD
SHIPPING & MANAGEMENT CORPORATION, Petitioner,
vs.
HON. EDWIN SORONGON (in his capacity as Presiding Judge of Branch 214 of the
Regional Trial Court of Mandaluyong City), SOCRATES ANTZOULATOS, CARMEN
ALAMIL, MARCELl GAZA and MARKOS AVGOUSTIS, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari[ 1] filed by Dante La.
Jimenez (petitioner) to challenge the twin resolutions of the Court of Appeals
( CA) dated November 23, 20062 and June 28, 20073 in CA-G.R. SP No. 96584, which
dismissed the petitioner's petition for certiorari and denied his motion for
reconsideration, respectively.
The Factual Antecedents
The petitioner is the president of Unlad Shipping & Management Corporation, a
local manning agency, while Socrates Antzoulatos, Carmen Alamil, Marceli Gaza,
and Markos Avgoustis (respondents) are some of the listed incorporators of Tsakos
Maritime Services, Inc. (TMSI), another local manning agency.
On August 19, 2003, the petitioner filed a complaint-affidavit4 with the Office of the
City Prosecutor of Mandaluyong City against the respondents for syndicated and
large scale illegal recruitment.5 The petitioner alleged that the respondents falsely
represented their stockholdings in TMSI’s articles of incorporation6 to secure a
license to operate as a recruitment agency from the Philippine Overseas
Employment Agency (POEA).
On October 9, 2003, respondents Antzoulatos and Gaza filed their joint counter-
affidavit denying the complaint-affidavit’s allegations.7 Respondents Avgoustis and
Alamil did not submit any counter-affidavit.
In a May 4, 2004 resolution,8 the 3rd Assistant City Prosecutor recommended the
filing of an information for syndicated and large scale illegal recruitment against the
respondents. The City Prosecutor approved his recommendation and filed the
corresponding criminal information with the Regional Trial Court (RTC) of
Mandaluyong City (docketed as Criminal Case No. MC04-8514 and raffled to Branch
212) presided by Judge Rizalina T. Capco-Umali.
Subsequently, in a December 14, 2004 resolution, the City Prosecutor reconsidered
the May 4, 2004 resolution and filed a motion with the RTC to withdraw the
information.9 The petitioner and respondents Antzoulatos and Gaza filed their
opposition10 and comment to the opposition, respectively.
In an August 1, 2005 resolution,11 the RTC denied the motion to withdraw
information as it found the existence of probable cause to hold the respondents for
trial.12 Thus, the RTC ordered the issuance of warrants of arrest against the
respondents.
On August 26, 2005, respondents Antzoulatos and Gaza filed an omnibus motion for
reconsideration and for deferred enforcement of the warrants of arrest. 13 In a
September 2, 2005 order,14 the RTC denied the omnibus motion, reiterating that
the trial court is the sole judge on whether a criminal case should be dismissed or
not.
On September 26, 2005, respondent Alamil filed a motion for judicial determination
of probable cause with a request to defer enforcement of the warrants of arrest. 15
On September 29, 2005, the petitioner filed his opposition with motion to expunge,
contending that respondent Alamil, being a fugitive from justice, had no standing to
seek any relief and that the RTC, in the August 1, 2005 resolution, already found
probable cause to hold the respondents for trial.16
In a September 30, 2005 order,17 the RTC denied respondent Alamil’s motion for
being moot and academic; it ruled that it had already found probable cause against
the respondents in the August 1, 2005 resolution, which it affirmed in the
September 2, 2005 order.
On October 10, 2005, respondent Alamil moved for reconsideration and for the
inhibition of Judge Capco-Umali, for being biased or partial.18 On October 25, 2005,
the petitioner filed an opposition with a motion to expunge, reiterating that
respondent Alamil had no standing to seek relief from the RTC. 19
In a January 4, 2006 order,20 Judge Capco-Umali voluntarily inhibited herself from
the case and did not resolve respondent Alamil’s motion for reconsideration and
the petitioner’s motion to expunge. The case was later re-raffled to Branch 214,
presided by Judge Edwin D. Sorongon.
The RTC Rulings
In its March 8, 2006 order,21 the RTC granted respondent Alamil’s motion for
reconsideration. It treated respondent Alamil’s motion for judicial determination as
a motion to dismiss for lack of probable cause. It found: (1) no evidence on record
to indicate that the respondents gave any false information to secure a license to
operate as a recruitment agency from the POEA; and (2) that respondent Alamil
voluntarily submitted to the RTC’s jurisdiction through the filing of pleadings
seeking affirmative relief. Thus, the RTC dismissed the case, and set aside the earlier
issued warrants of arrest.
On April 3, 2006, the petitioner moved for reconsideration, stressing the existence
of probable cause to prosecute the respondents and that respondent Alamil had no
standing to seek any relief from the RTC.22
On April 26, 2006, respondent Alamil moved to expunge the motion for being a
prohibited pleading since the motion did not have the public prosecutor’s
conformity.23
In its May 10, 2006 order,24 the RTC denied the petitioner’s motion for
reconsideration, finding that the petitioner merely reiterated arguments in issues
that had been finally decided. The RTC ordered the motion expunged from the
records since the motion did not have the public prosecutor’s conformity.
On May 19, 2006, the petitioner filed a notice of appeal.25
On May 30, 2006, respondent Alamil moved to expunge the petitioner’s notice of
appeal since the public prosecutor did not authorize the appeal and the petitioner
had no civil interest in the case.26
On June 27, 2006, the petitioner filed his comment to the motion to expunge,
claiming that, as the offended party, he has the right to appeal the RTC order
dismissing the case; the respondents’ fraudulent acts in forming TMSI greatly
prejudiced him.27
In its August 7, 2006 joint order,28 the RTC denied the petitioner’s notice of appeal
since the petitioner filed it without the conformity of the Solicitor General, who is
mandated to represent the People of the Philippines in criminal actions appealed to
the CA. Thus, the RTC ordered the notice of appeal expunged from the records.
On October 18, 2006, the petitioner elevated his case to the CA via a Rule 65
petition for certiorari assailing the RTC’s March 8, 2006, May 10, 2006, and August
7, 2006 orders.
The CA Ruling
In its November 23, 2006 resolution,29 the CA dismissed outright the petitioner’s
Rule 65 petition for lack of legal personality to file the petition on behalf of the
People of the Philippines. It noted that only the Office of the Solicitor General (OSG)
has the legal personality to represent the People, under Section 35(1), Chapter 12,
Title III, Book IV of the 1987 Administrative Code. It also held that the petitioner
was not the real party in interest to institute the case, him not being a victim of the
crime charged to the respondents, but a mere competitor in their recruitment
business. The CA denied30 the motion for reconsideration31 that followed.
The Petition
The petitioner argues that he has a legal standing to assail the dismissal of the
criminal case since he is the private complainant and a real party in interest who
had been directly damaged and prejudiced by the respondents’ illegal acts;
respondent Alamil has no legal standing to seek any relief from the RTC since she is
a fugitive from justice.
The Case for the Respondents
The respondents32 submit that the petitioner lacks a legal standing to assail the
dismissal of the criminal case since the power to prosecute lies solely with the
State, acting through a public prosecutor; the petitioner acted independently and
without the authority of a public prosecutor in the prosecution and appeal of the
case.
The Issue
The case presents to us the issue of whether the CA committed a reversible error in
dismissing outright the petitioner’s Rule 65 petition for certiorari for lack of legal
personality to file the petition on behalf of the People of the Philippines.
Our Ruling
The petition lacks merit.
The petitioner has no legal personality to assail the dismissal of the criminal case
It is well-settled that "every action must be prosecuted or defended in the name of
the real party in interest[,]" "who stands to be benefited or injured by the judgment
in the suit, or by the party entitled to the avails of the suit." 33Interest means
material interest or an interest in issue to be affected by the decree or judgment of
the case, as distinguished from mere interest in the question involved. 34 By real
interest is meant a present substantial interest, as distinguished from a mere
expectancy, or a future, contingent, subordinate or consequential interest. 35 When
the plaintiff or the defendant is not a real party in interest, the suit is dismissible. 36
Procedural law basically mandates that "[a]ll criminal actions commenced by
complaint or by information shall be prosecuted under the direction and control of
a public prosecutor."37 In appeals of criminal cases before the CA and before this
Court, the OSG is the appellate counsel of the People, pursuant to Section 35(1),
Chapter 12, Title III, Book IV of the 1987 Administrative Code. This section explicitly
provides:
SEC. 35. Powers and Functions. — The Office of the Solicitor General shall represent
the Government of the Philippines, its agencies and instrumentalities and its
officials and agents in any litigation, proceeding, investigation or matter requiring
the services of lawyers. . . . It shall have the following specific powers and functions:
(1) Represent the Government in the Supreme Court and the Court of Appeals in
all criminal proceedings; represent the Government and its officers in the Supreme
Court and Court of Appeals, and all other courts or tribunals in all civil actions and
special proceedings in which the Government or any officer thereof in his official
capacity is a party. (emphasis added)
The People is the real party in interest in a criminal case and only the OSG can
represent the People in criminal proceedings pending in the CA or in this Court. This
ruling has been repeatedly stressed in several cases38 and continues to be the
controlling doctrine.
While there may be rare occasions when the offended party may be allowed to
pursue the criminal action on his own behalf39 (as when there is a denial of due
process), this exceptional circumstance does not apply in the present case.
In this case, the petitioner has no legal personality to assail the dismissal of the
criminal case since the main issue raised by the petitioner involved the criminal
aspect of the case, i.e., the existence of probable cause. The petitioner did not
appeal to protect his alleged pecuniary interest as an offended party of the crime,
but to cause the reinstatement of the criminal action against the respondents. This
involves the right to prosecute which pertains exclusively to the People, as
represented by the OSG.40
Respondent Alamil voluntarily submitted to the RTC’s jurisdiction
As a rule, one who seeks an affirmative relief is deemed to have submitted to the
jurisdiction of the court. Filing pleadings seeking affirmative relief constitutes
voluntary appearance, and the consequent jurisdiction of one's person to the
jurisdiction of the court.41
Thus, by filing several motions before the RTC seeking the dismissal of the criminal
case, respondent Alamil voluntarily submitted to the jurisdiction of the RTC.
Custody of the law is not required for the adjudication of reliefs other than an
application for bail.42
WHEREFORE, we hereby DENY the appeal. The twin resolutions of the CoUJt of
Appeals dated November 23, 2006 and June 28, 2007 in CAG. R. SP No. 96584
are AFFIRMED. Costs against the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179169 March 3, 2010
LEONIS NAVIGATION CO., INC. and WORLD MARINE PANAMA, S.A., Petitioners,
vs.
CATALINO U. VILLAMATER and/or The Heirs of the Late Catalino U. Villamater,
represented herein by Sonia Mayuyu Villamater; and NATIONAL LABOR
RELATIONS COMMISSION, Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court,
seeking to annul and set aside the Decision2 dated May 3, 2007 and the
Resolution3 dated July 23, 2007 of the Court of Appeals (CA) in CA-G.R. SP No.
85594, entitled "Leonis Navigation Co., Inc., et al. v. Catalino U. Villamater, et al."
The antecedents of this case are as follows:
Private respondent Catalino U. Villamater (Villamater) was hired as Chief Engineer
for the ship MV Nord Monaco, owned by petitioner World Marine Panama, S.A.,
through the services of petitioner Leonis Navigation Co., Inc. (Leonis), as the latter’s
local manning agent. Consequent to this employment, Villamater, on June 4, 2002,
executed an employment contract,4 incorporating the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going
Vessels as prescribed by the Philippine Overseas Employment Administration
(POEA).
Prior to his deployment, Villamater underwent the required Pre-Employment
Medical Examination (PEME). He passed the PEME and was declared "Fit to
Work."5 Thereafter, Villamater was deployed on June 26, 2002.
Sometime in October 2002, around four (4) months after his deployment,
Villamater suffered intestinal bleeding and was given a blood transfusion.
Thereafter, he again felt weak, lost considerable weight, and suffered intermittent
intestinal pain. He consulted a physician in Hamburg, Germany, who advised
hospital confinement. Villamater was diagnosed with Obstructive Adenocarcinoma
of the Sigmoid, with multiple liver metastases, possibly local peritoneal carcinosis
and infiltration of the bladder, possibly lung metastasis, and anemia; Candida
Esophagitis; and Chronic Gastritis. He was advised to undergo chemotherapy and
continuous supportive treatment, such as pain-killers and blood transfusion.6
Villamater was later repatriated, under medical escort, as soon as he was deemed
fit to travel. As soon as he arrived in the Philippines, Villamater was referred to
company-designated physicians. The diagnosis and the recommended treatment
abroad were confirmed. He was advised to undergo six (6) cycles of chemotherapy.
However, Dr. Kelly Siy Salvador, one of the company-designated physicians, opined
that Villamater’s condition "appears to be not work-related," but suggested a
disability grading of 1.7
In the course of his chemotherapy, when no noticeable improvement occurred,
Villamater filed a complaint8 before the Arbitration Branch of the National Labor
Relations Commission (NLRC) for payment of permanent and total disability
benefits in the amount of US$80,000.00, reimbursement of medical and
hospitalization expenses in the amount of P11,393.65, moral damages in the sum
of P1,000,000.00, exemplary damages in the amount of P1,000,000.00, as well as
attorney’s fees.
After the submission of the required position papers, the Labor Arbiter rendered a
decision9 dated July 28, 2003 in favor of Villamater, holding that his illness was
compensable, but denying his claim for moral and exemplary damages. The Labor
Arbiter disposed as follows—
WHEREFORE, foregoing premises considered, judgment is hereby rendered
declaring complainant’s illness to be compensable and ordering respondents
LEONIS NAVIGATION CO., INC. and WORLD MARINE PANAMA, S.A. liable to pay,
jointly and severally, complainant CATALINO U. VILLAMATER, the amount of
US$60,000.00 or its Philippine Peso equivalent at the time of actual payment,
representing the latter’s permanent total disability benefits plus ten percent (10%)
thereof as Attorney’s Fees.
All other claims are dismissed for lack of merit.
SO ORDERED.10
Petitioners appealed to the NLRC. Villamater also filed his own appeal, questioning
the award of the Labor Arbiter and claiming that the 100% degree of disability
should be compensated in the amount of US$80,000.00, pursuant to Section 2,
Article XXI of the ITF-JSU/AMOSUP Collective Bargaining Agreement (CBA) between
petitioners and Associated Marine Officers & Seamen’s Union of the Philippines,
which covered the employment contract of Villamater.
On February 4, 2004, the NLRC issued its resolution,11 dismissing the respective
appeals of both parties and affirming in toto the decision of the Labor Arbiter.
Petitioners filed their motion for reconsideration of the February 4, 2004 resolution,
but the NLRC denied the same in its resolution dated June 15, 2004.
Aggrieved, petitioners filed a petition for certiorari under Rule 65 of the Rules of
Court before the CA. After the filing of the required memoranda, the CA rendered
its assailed May 3, 2007 Decision, dismissing the petition. The appellate court,
likewise, denied petitioners’ motion for reconsideration in its July 23, 2007
Resolution.
Hence, this petition based on the following grounds, to wit:
First, the Court of Appeals erroneously held that [the] Commission’s Dismissal
Decision does not constitute grave abuse of discretion amounting to lack or excess
of jurisdiction but mere error of judgment, considering that the decision lacks
evidentiary support and is contrary to both evidence on record and prevailing law
and jurisprudence.
Second, the Court of Appeals seriously erred in upholding the NLRC’s decision to
award Grade 1 Permanent and Total Disability Benefits in favor of seaman
Villamater despite the lack of factual and legal basis to support such award, and
more importantly, when it disregarded undisputed facts and substantial evidence
presented by petitioners which show that seaman Villamater’s illness was not work-
related and hence, not compensable, as provided by the Standard Terms of the
POEA Contract.
Third, the Court of Appeals erred in holding that non-joinder of indispensable
parties warrant the outright dismissal of the Petition for Review on Certiorari.
Fourth, the Court of Appeals erroneously held that final and executory decisions or
resolutions of the NLRC render appeals to superior courts moot and academic.
Last, the Court of Appeals seriously erred in upholding the award of attorney’s fees
considering that the grant has neither factual nor legal basis.12
Before delving into the merits of this petition, we deem it fit to discuss the
procedural issues raised by petitioners.
First. It is worthy to note that the CA dismissed the petition, considering that (1) the
June 15, 2004 Resolution of the NLRC had already become final and executory on
June 26, 2004, and the same was already recorded in the NLRC Book of Entries of
Judgments; and that (2) the award of the Labor Arbiter was already executed, thus,
the case was closed and terminated.
According to Sections 14 and 15, Rule VII of the 2005 Revised Rules of Procedure of
the NLRC—
Section 14. Finality of decision of the commission and entry of judgment. – a)
Finality of the Decisions, Resolutions or Orders of the Commission. – Except as
provided in Section 9 of Rule X, the decisions, resolutions or orders of the
Commission shall become final and executory after ten (10) calendar days from
receipt thereof by the parties.
b) Entry of Judgment. – Upon the expiration of the ten (10) calendar day period
provided in paragraph (a) of this Section, the decision, resolution, or order shall be
entered in a book of entries of judgment.
The Executive Clerk or Deputy Executive Clerk shall consider the decision, resolution
or order as final and executory after sixty (60) calendar days from date of mailing in
the absence of return cards, certifications from the post office, or other proof of
service to parties.
Section 15. Motions for reconsideration. – Motion for reconsideration of any
decision, resolution or order of the Commission shall not be entertained except
when based on palpable or patent errors; provided that the motion is under oath
and filed within ten (10) calendar days from receipt of decision, resolution or order,
with proof of service that a copy of the same has been furnished, within the
reglementary period, the adverse party; and provided further, that only one such
motion from the same party shall be entertained.
Should a motion for reconsideration be entertained pursuant to this SECTION, the
resolution shall be executory after ten (10) calendar days from receipt thereof. 13
Petitioners received the June 15, 2004 resolution of the NLRC, denying their motion
for reconsideration, on June 16, 2004. They filed their petition for certiorari before
the CA only on August 9, 2004,14 or 54 calendar days from the date of notice of the
June 15, 2004 resolution. Considering that the above-mentioned 10-day period had
lapsed without petitioners filing the appropriate appeal, the NLRC issued an Entry of
Judgment dated June 28, 2004.
Moreover, by reason of the finality of the June 15, 2004 NLRC resolution, the Labor
Arbiter issued on July 29, 2004 a Writ of Execution.15 Consequently, Leonis
voluntarily paid Villamater’s widow, Sonia M. Villamater (Sonia), the amount
of P3,649,800.00, with Rizal Commercial and Banking Corporation (RCBC)
Manager’s Check No. 000000855016 dated August 12, 2004, as evidenced by the
Acknowledgment Receipt17 dated August 13, 2004, and the Cheque
Voucher18 dated August 12, 2004. Following the complete satisfaction of the
judgment award, the Labor Arbiter issued an Order19 dated September 8, 2004 that
reads—
There being complete satisfaction of the judgment award as shown by the record
upon receipt of the complainant of the amount of P3,649,800.00, voluntarily paid
by the respondent, as full and final satisfaction of the Writ of Execution dated July
29, 2004; and finding the same to be not contrary to law, morals, good custom, and
public policy, and pursuant to Section 14, Rule VII of the Rules of Procedure of the
National Labor Relations Commission (NLRC), this case is hereby ordered DISMISSED
with prejudice, and considered CLOSED and TERMINATED.
SO ORDERED.
Petitioners never moved for a reconsideration of this Order regarding the
voluntariness of their payment to Sonia, as well as the dismissal with prejudice and
the concomitant termination of the case.
However, petitioners argued that the finality of the case did not render the petition
for certiorari before the CA moot and academic. On this point, we agree with
petitioners.
In the landmark case of St. Martin Funeral Home v. NLRC,20 we ruled that judicial
review of decisions of the NLRC is sought via a petition for certiorari under Rule 65
of the Rules of Court, and the petition should be filed before the CA, following the
strict observance of the hierarchy of courts. Under Rule 65, Section 4, 21 petitioners
are allowed sixty (60) days from notice of the assailed order or resolution within
which to file the petition. Thus, although the petition was not filed within the 10-
day period, petitioners reasonably filed their petition for certiorari before the CA
within the 60-day reglementary period under Rule 65.
Further, a petition for certiorari does not normally include an inquiry into the
correctness of its evaluation of the evidence. Errors of judgment, as distinguished
from errors of jurisdiction, are not within the province of a special civil action for
certiorari, which is merely confined to issues of jurisdiction or grave abuse of
discretion. It is, thus, incumbent upon petitioners to satisfactorily establish that the
NLRC acted capriciously and whimsically in order that the extraordinary writ of
certiorari will lie. By grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must
be shown that the discretion was exercised arbitrarily or despotically.
The CA, therefore, could grant the petition for certiorari if it finds that the NLRC, in
its assailed decision or resolution, committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily disregarding evidence that is material to or
decisive of the controversy; and it cannot make this determination without looking
into the evidence of the parties. Necessarily, the appellate court can only evaluate
the materiality or significance of the evidence, which is alleged to have been
capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all
other evidence on record.22 Notably, if the CA grants the petition and nullifies the
decision or resolution of the NLRC on the ground of grave abuse of discretion
amounting to excess or lack of jurisdiction, the decision or resolution of the NLRC is,
in contemplation of law, null and void ab initio; hence, the decision or resolution
never became final and executory.23
In the recent case Bago v. National Labor Relations Commission,24 we had occasion
to rule that although the CA may review the decisions or resolutions of the NLRC on
jurisdictional and due process considerations, particularly when the decisions or
resolutions have already been executed, this does not affect the statutory finality of
the NLRC decisions or resolutions in view of Rule VIII, Section 6 of the 2002 New
Rules of Procedure of the NLRC, viz.:
 RULE VIII
xxxx
SECTION 6. EFFECT OF FILING OF PETITION FOR CERTIORARI ON EXECUTION. – A
petition for certiorari with the Court of Appeals or the Supreme Court shall not stay
the execution of the assailed decision unless a temporary restraining order is issued
by the Court of Appeals or the Supreme Court.25
Simply put, the execution of the final and executory decision or resolution of the
NLRC shall proceed despite the pendency of a petition for certiorari, unless it is
restrained by the proper court. In the present case, petitioners already paid
Villamater’s widow, Sonia, the amount of P3,649,800.00, representing the total and
permanent disability award plus attorney’s fees, pursuant to the Writ of Execution
issued by the Labor Arbiter. Thereafter, an Order was issued declaring the case as
"closed and terminated." However, although there was no motion for
reconsideration of this last Order, Sonia was, nonetheless, estopped from claiming
that the controversy had already reached its end with the issuance of the Order
closing and terminating the case. This is because the Acknowledgment Receipt she
signed when she received petitioners’ payment was without prejudice to the final
outcome of the petition for certiorari pending before the CA.
Second. We also agree with petitioners in their position that the CA erred in
dismissing outright their petition for certiorari on the ground of non-joinder of
indispensable parties. It should be noted that petitioners impleaded only the then
deceased Villamater26 as respondent to the petition, excluding his heirs.
Rule 3, Section 7 of the Rules of Court defines indispensable parties as those who
are parties in interest without whom there can be no final determination of an
action.27 They are those parties who possess such an interest in the controversy
that a final decree would necessarily affect their rights, so that the courts cannot
proceed without their presence.28 A party is indispensable if his interest in the
subject matter of the suit and in the relief sought is inextricably intertwined with
the other parties’ interest.29
Unquestionably, Villamater’s widow stands as an indispensable party to this case.
Under Rule 3, Section 11 of the Rules of Court, neither misjoinder nor non-joinder
of parties is a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder
of parties is ground for dismissal of an action. Parties may be dropped or added by
order of the court on motion of any party or on its own initiative at any stage of the
action and on such terms as are just. Any claim against a misjoined party may be
severed and proceeded with separately.
The proper remedy is to implead the indispensable party at any stage of the action.
The court, either motu proprio or upon the motion of a party, may order the
inclusion of the indispensable party or give the plaintiff an opportunity to amend his
complaint in order to include indispensable parties. If the plaintiff ordered to
include the indispensable party refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own
motion. Only upon unjustified failure or refusal to obey the order to include or to
amend is the action dismissed.30
On the merits of this case, the questions to be answered are: (1) Is Villamater
entitled to total and permanent disability benefits by reason of his colon cancer? (2)
If yes, would he also be entitled to attorney’s fees?
As to Villamater’s entitlement to total and permanent disability benefits, petitioners
argue, in essence, that colon cancer is not among the occupational diseases listed
under Section 32-A of the POEA Standard Terms and Conditions Governing the
Employment of Filipino Seafarers On-Board Ocean Going Vessels (POEA Standard
Contract), and that the risk of contracting the same was not increased by
Villamater’s working conditions during his deployment. Petitioners posit that
Villamater had familial history of colon cancer; and that, although dietary
considerations may be taken, his diet -- which might have been high in fat and low
in fiber and could have thus increased his predisposition to develop colon cancer --
might only be attributed to him, because it was he who chose what he ate on board
the vessels he was assigned to. Petitioners also cited the supposed declaration of
their company-designated physicians who attended to Villamater that his disease
was not work-related.
We disagree.
It is true that under Section 32-A of the POEA Standard Contract, only two types of
cancers are listed as occupational diseases – (1) Cancer of the epithelial lining of the
bladder (papilloma of the bladder); and (2) cancer, epithellematous or ulceration of
the skin or of the corneal surface of the eye due to tar, pitch, bitumen, mineral oil
or paraffin, or compound products or residues of these substances. Section 20 of
the same Contract also states that those illnesses not listed under Section 32 are
disputably presumed as work-related. Section 20 should, however, be read together
with Section 32-A on the conditions to be satisfied for an illness to be
compensable,31 to wit:
For an occupational disease and the resulting disability or death to be compensable,
all the following conditions must be established:
1. The seafarer’s work must involve the risk described herein;
2. The disease was contracted as a result of the seafarer’s exposure to the
described risks;
3. The disease was contracted within a period of exposure and under such
other factors necessary to contract it;
4. There was no notorious negligence on the part of the seafarer.
Colon cancer, also known as colorectal cancer or large bowel cancer, includes
cancerous growths in the colon, rectum and appendix. With 655,000 deaths
worldwide per year, it is the fifth most common form of cancer in the United States
of America and the third leading cause of cancer-related deaths in the Western
World. Colorectal cancers arise from adenomatous polyps in the colon. These
mushroom-shaped growths are usually benign, but some develop into cancer over
time. Localized colon cancer is usually diagnosed through colonoscopy. 32
Tumors of the colon and rectum are growths arising from the inner wall of the large
intestine. Benign tumors of the large intestine are called polyps. Malignant tumors
of the large intestine are called cancers. Benign polyps can be easily removed
during colonoscopy and are not life-threatening. If benign polyps are not removed
from the large intestine, they can become malignant (cancerous) over time. Most of
the cancers of the large intestine are believed to have developed as polyps.
Colorectal cancer can invade and damage adjacent tissues and organs. Cancer cells
can also break away and spread to other parts of the body (such as liver and lung)
where new tumors form. The spread of colon cancer to distant organs is called
metastasis of the colon cancer. Once metastasis has occurred in colorectal cancer, a
complete cure of the cancer is unlikely.33
Globally, colorectal cancer is the third leading cause of cancer in males and the
fourth leading cause of cancer in females. The frequency of colorectal cancer varies
around the world. It is common in the Western world and is rare in Asia and in
Africa. In countries where the people have adopted western diets, the incidence of
colorectal cancer is increasing.34
Factors that increase a person’s risk of colorectal cancer include high fat intake, a
family history of colorectal cancer and polyps, the presence of polyps in the large
intestine, and chronic ulcerative colitis.35
Diets high in fat are believed to predispose humans to colorectal cancer. In
countries with high colorectal cancer rates, the fat intake by the population is much
higher than in countries with low cancer rates. It is believed that the breakdown
products of fat metabolism lead to the formation of cancer-causing chemicals
(carcinogens). Diets high in vegetables and high-fiber foods may rid the bowel of
these carcinogens and help reduce the risk of cancer.36
A person’s genetic background is an important factor in colon cancer risk. Among
first-degree relatives of colon-cancer patients, the lifetime risk of developing colon
cancer is 18%. Even though family history of colon cancer is an important risk
factor, majority (80%) of colon cancers occur sporadically in patients with no family
history of it. Approximately 20% of cancers are associated with a family history of
colon cancer. And 5% of colon cancers are due to hereditary colon cancer
syndromes. Hereditary colon cancer syndromes are disorders where affected family
members have inherited cancer-causing genetic defects from one or both of the
parents.37
In the case of Villamater, it is manifest that the interplay of age, hereditary, and
dietary factors contributed to the development of colon cancer. By the time he
signed his employment contract on June 4, 2002, he was already 58 years old,
having been born on October 5, 1943,38 an age at which the incidence of colon
cancer is more likely.39He had a familial history of colon cancer, with a brother who
succumbed to death and an uncle who underwent surgery for the same
illness.40 Both the Labor Arbiter and the NLRC found his illness to be compensable
for permanent and total disability, because they found that his dietary provisions
while at sea increased his risk of contracting colon cancer because he had no choice
of what to eat on board except those provided on the vessels and these consisted
mainly of high-fat, high-cholesterol, and low-fiber foods.
While findings of the Labor Arbiter, which were affirmed by the NLRC, are entitled
to great weight and are binding upon the courts, nonetheless, we find it also worthy
to note that even during the proceedings before the Labor Arbiter, Villamater cited
that the foods provided on board the vessels were mostly meat, high in fat and high
in cholesterol. On this matter, noticeably, petitioners were silent when they argued
that Villamater’s affliction was brought about by diet and genetics. It was only after
the Labor Arbiter issued his Decision, finding colon cancer to be compensable
because the risk was increased by the victuals provided on board, that petitioners
started claiming that the foods available on the vessels also consisted of fresh fruits
and vegetables, not to mention fish and poultry. It is also worth mentioning that
while Dr. Salvador declared that Villamater’s cancer "appears to be not work-
related," she nevertheless suggested to petitioners Disability Grade 1, which, under
the POEA Standard Contract, "shall be considered or shall constitute total and
permanent disability."41 During his confinement in Hamburg, Germany, Villamater
was diagnosed to have colon cancer and was advised to undergo chemotherapy and
medical treatment, including blood transfusions. These findings were, in fact,
confirmed by the findings of the company-designated physicians. The statement of
Dr. Salvador that Villamater’s colon cancer "appears to be not work-related"
remained at that, without any medical explanation to support the same. However,
this statement, not definitive as it is, was negated by the same doctor’s suggestion
of Disability Grade 1. Under Section 20-B of the Philippine Overseas Employment
Administration-Standard Employment Contract (POEA-SEC), it is the company-
designated physician who must certify that the seafarer has suffered a permanent
disability, whether total or partial, due to either injury or illness, during the term of
his employment.42
On these points, we sustain the Labor Arbiter and the NLRC in granting total and
permanent disability benefits in favor of Villamater, as it was sufficiently shown that
his having contracted colon cancer was, at the very least, aggravated by his working
conditions,43 taking into consideration his dietary provisions on board, his age, and
his job as Chief Engineer, who was primarily in charge of the technical and
mechanical operations of the vessels to ensure voyage safety. Jurisprudence
provides that to establish compensability of a non-occupational disease, reasonable
proof of work-connection and not direct causal relation is required. Probability, not
the ultimate degree of certainty, is the test of proof in compensation proceedings. 44
The Labor Arbiter correctly awarded Villamater total and permanent disability
benefits, computed on the basis of the schedule provided under the POEA Standard
Contract, considering that the schedule of payment of benefits under the ITF-
JSU/AMOSUP CBA refers only to permanent disability as a result of an accident or
injury.45
By reason of Villamater’s entitlement to total and permanent disability benefits, he
(or in this case his widow Sonia) is also entitled to the award of attorney’s fees, not
under Article 2208(2) of the Civil Code, "[w]hen the defendant’s act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest," but under Article 2208(8) of the same Code, involving actions for
indemnity under workmen’s compensation and employer’s liability laws.
WHEREFORE, the petition is DENIED and the assailed May 3, 2007 Decision and the
July 23, 2007 Resolution of the Court of Appeals are AFFIRMED. Costs against
petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SPECIAL THIRD DIVISION
G.R. No. 182645 December 15, 2010
In the Matter of the Heirship (Intestate Estates) of the Late Hermogenes
Rodriguez, Antonio Rodriguez, Macario J. Rodriguez, Delfin Rodriguez, and
Consuelo M. Rodriguez and Settlement of their Estates,
RENE B. PASCUAL, Petitioner,
vs.
JAIME M. ROBLES, Respondent.
RESOLUTION
PERALTA, J.:
Before the Court is the Very Urgent Motion for Reconsideration of Jaime M. Robles
(Robles) seeking to set aside this Court's Decision dated December 4, 2009 which
nullified the April 16, 2002 Decision of the Court of Appeals (CA) in CA-G.R. SP No.
57417 and the February 27, 2007 Order of the Regional Trial Court (RTC) of Iriga
City, Branch 34 in SP No. IR-1110 and reinstated the August 13, 1999 Amended
Decision of the same RTC in the same case.
Robles' Motion is based on the following arguments:
A.) THE HEREIN MOVANT – JAIME M. ROBLES, BEING A REAL PARTY-IN-
INTEREST – WAS NEVER IMPLEADED AS RESPONDENT IN THE PETITION
FOR CERTIORARI (WITH PRAYER TO CLARIFY JUDGMENT) DATED MAY 10,
2008 WHICH WAS FILED BEFORE THIS HONORABLE SUPREME COURT ON
MAY 13, 2008 - - - BY PETITIONER-RENE B. PASCUAL;
B.) THE DECISION DATED DECEMBER 04, 2009 ISSUED BY THIS HONORABLE
SUPREME COURT IN G.R. NO. 182645 WAS RENDERED BASED ON A
PETITION FOR CERTIORARI AND MEMORANDUM DATED APRIL 7, 2009,
WHOSE COPIES THEREOF WERE NEVER SERVED UPON THE HEREIN
MOVANT;
 C.) THE NAME OF HEREIN MOVANT-JAIME M. ROBLES APPEARS AS
RESPONDENT IN THE TITLE OF THIS CASE AS CAPTIONED IN THE
HONORABLE SUPREME COURT'S ASSAILED DECISION DATED DECEMBER
04, 2009. HOWEVER, HE WAS NOT REQUIRED TO FILE COMMENT NOR
ANSWER TO THE PETITION, A CLEAR VIOLATION TO (sic) THE RULES OF
COURT AND TO (sic) THE CONSTITUTION.
D.) THE PUBLIC RESPONDENT COURT OF APPEALS PRESENTED THE SALIENT
CIRCUMSTANCES THAT WOULD JUSTIFY THE RELAXATION OF THE RULES
ON THE PERFECTION OF AN APPEAL AND THE RULE THAT CERTIORARI IS
NOT A SUBSTITUTE FOR A LOST APPEAL. THE DECISION ISSUED BY THE
PUBLIC RESPONDENT HONORABLE COURT OF APPEALS DATED APRIL 16,
2002 HAS ALREADY ATTAINED FINALITY BY WAY OF AN ENTRY OF
JUDGMENT ISSUED BY THIS HONORABLE COURT ON NOVEMBER 10, 2005,
IN G.R. NO. 168648 ENTITLED JAIME M. ROBLES PETITIONER, VS. HENRY F.
RODRIGUEZ, ET. AL., AS RESPONDENTS.1
Robles prays for the reversal of the presently assailed Decision and the entry of a
new judgment requiring him to file his comment and memorandum to the petition.
Robles also seeks the reinstatement of the December 15, 1994 Order of the RTC
declaring him as the only forced heir and next of kin of Hermogenes Rodriguez.
For a clearer discussion and resolution of the instant Motion, it bears to restate the
relevant antecedent facts as stated in the assailed Decision of this Court, to wit:
On 14 September 1989, a petition for Declaration of Heirship and Appointment of
Administrator and Settlement of the Estates of the Late Hermogenes Rodriguez
(Hermogenes) and Antonio Rodriguez (Antonio) was filed before the RTC [of Iriga
City]. The petition, docketed as Special Proceeding No. IR-1110, was filed by Henry
F. Rodriguez (Henry), Certeza F. Rodriguez (Certeza), and Rosalina R. Pellosis
(Rosalina). Henry, Certeza and Rosalina sought that they be declared the sole and
surviving heirs of the late Antonio Rodriguez and Hermogenes Rodriguez. They
alleged they are the great grandchildren of Antonio based on the following
genealogy: that Henry and Certeza are the surviving children of Delfin M. Rodriguez
(Delfin) who died on 8 February 1981, while Rosalina is the surviving heir of
Consuelo M. Rodriguez (Consuelo); that Delfin and Consuelo were the heirs of
Macario J. Rodriguez (Macario) who died in 1976; that Macario and Flora Rodriguez
were the heirs of Antonio; that Flora died without an issue in 1960 leaving Macario
as her sole heir.
Henry, Certeza and Rosalina's claim to the intestate estate of the late Hermogenes
Rodriguez, a former gobernadorcillo, is based on the following lineage: that Antonio
and Hermogenes were brothers and the latter died in 1910 without issue, leaving
Antonio as his sole heir.
At the initial hearing of the petition on 14 November 1989, nobody opposed the
petition. Having no oppositors to the petition, the RTC entered a general default
against the whole world, except the Republic of the Philippines. After presentation
of proof of compliance with jurisdictional requirements, the RTC allowed Henry,
Certeza and Rosalina to submit evidence before a commissioner in support of the
petition. After evaluating the evidence presented, the commissioner found that
Henry, Certeza and Rosalina are the grandchildren in the direct line of Antonio and
required them to present additional evidence to establish the alleged fraternal
relationship between Antonio and Hermogenes.
Taking its cue from the report of the commissioner, the RTC rendered a Partial
Judgment dated 31 May 1990 declaring Henry, Certeza and Rosalina as heirs in the
direct descending line of the late Antonio, Macario and Delfin and appointing Henry
as regular administrator of the estate of the decedents Delfin, Macario and Antonio,
and as special administrator to the estate of Hermogenes.
Henry filed the bond and took his oath of office as administrator of the subject
estates.
Subsequently, six groups of oppositors entered their appearances either as a group
or individually, namely:
(1) The group of Judith Rodriguez;
(2) The group of Carola Favila-Santos;
(3) Jaime Robles;
(4) Florencia Rodriguez;
(5) Victoria Rodriguez; and
(6) Bienvenido Rodriguez
Only the group of Judith Rodriguez had an opposing claim to the estate of Antonio,
while the rest filed opposing claims to the estate of Hermogenes.
In his opposition, Jamie Robles likewise prayed that he be appointed regular
administrator to the estates of Antonio and Hermogenes and be allowed to sell a
certain portion of land included in the estate of Hermogenes covered by OCT No.
12022 located at Barrio Manggahan, Pasig, Rizal.
After hearing on Jamie Robles' application for appointment as regular
administrator, the RTC issued an Order dated 15 December 1994 declaring him to
be an heir and next of kin of decedent Hermogenes and thus qualified to be the
administrator. Accordingly, the said order appointed Jaime Robles as regular
administrator of the entire estate of Hermogenes and allowed him to sell the
property covered by OCT No. 12022 located at Barrio Manggahan, Pasig Rizal.
On 27 April 1999, the RTC rendered a decision declaring Carola Favila-Santos and
her co-heirs as heirs in the direct descending line of Hermogenes and reiterated its
ruling in the partial judgment declaring Henry, Certeza and Rosalina as heirs of
Antonio. The decision dismissed the oppositions of Jamie Robles, Victoria
Rodriguez, Bienvenido Rodriguez, and Florencia Rodriguez, for their failure to
substantiate their respective claims of heirship to the late Hermogenes.
On 13 August 1999, the RTC issued an Amended Decision reversing its earlier
finding as to Carola Favila-Santos. This time, the RTC found Carola Favila-Santos and
company not related to the decedent Hermogenes. The RTC further decreed that
Henry, Certeza and Rosalina are the heirs of Hermogenes. The RTC also re-affirmed
its earlier verdict dismissing the oppositions of Jaime Robles, Victoria Rodriguez,
Bienvenido Rodriguez, and Florencia Rodriguez.2
Robles then appealed the August 13, 1999 Decision of the RTC by filing a Notice of
Appeal, but the same was denied by the trial court in its Order dated November 22,
1999 for Robles' failure to file a record on appeal.
Robles questioned the denial of his appeal by filing a petition for review on
certiorari with this Court.
In a Resolution dated February 14, 2000, this Court referred the petition to the CA
for consideration and adjudication on the merits on the ground that the said court
has jurisdiction concurrent with this Court and that no special and important reason
was cited for this Court to take cognizance of the said case in the first instance.
On April 16, 2002, the CA rendered judgment annulling the August 13, 1999
Amended Decision of the RTC.
Henry Rodriguez (Rodriguez) and his group moved for the reconsideration of the CA
decision, but the same was denied in a Resolution dated January 21, 2004.
Rodriguez and his co-respondents did not appeal the Decision and Resolution of the
CA.
On the other hand, Robles filed an appeal with this Court assailing a portion of the
CA Decision. On August 1, 2005, this Court issued a Resolution denying the petition
of Robles and, on November 10, 2005, the said Resolution became final and
executory.
On May 13, 2008, the instant petition was filed.
On December 4, 2009, this Court rendered the presently assailed Decision which
held as follows:
In special proceedings, such as the instant proceeding for settlement of estate, the
period of appeal from any decision or final order rendered therein is 30 days, a
notice of appeal and a record on appeal being required. x x x
xxxx
The appeal period may only be interrupted by the filing of a motion for new trial or
reconsideration. Once the appeal period expires without an appeal being perfected,
the decision or order becomes final, x x x
xxxx
In the case under consideration, it was on 13 August 1999 that the RTC issued an
Amended Decision. On 12 October 1999, Jaime Robles erroneously filed a notice of
appeal instead of filing a record on appeal. The RTC, in an order dated 22 November
1999, denied this for his failure to file a record on appeal as required by the Rules of
Court. Petitioner failed to comply with the requirements of the rule; hence, the 13
August 1999 Amended Decision of the RTC lapsed into finality. It was, therefore, an
error for the Court of Appeals to entertain the case knowing that Jaime Robles'
appeal was not perfected and had lapsed into finality.
This Court has invariably ruled that perfection of an appeal in the manner and
within the period laid down by law is not only mandatory but also jurisdictional. The
failure to perfect an appeal as required by the rules has the effect of defeating the
right to appeal of a party and precluding the appellate court from acquiring
jurisdiction over the case. The right to appeal is not a natural right nor a part of due
process; it is merely a statutory privilege, and may be exercised only in the manner
and in accordance with the provisions of law. x x x Failure to meet the requirements
of an appeal deprives the appellate court of jurisdiction to entertain any appeal.
There are exceptions to this rule, unfortunately respondents did not present any
circumstances that would justify the relaxation of said rule. 3
The basic contention of Robles in the instant Motion is that he is a party-in-interest
who stands to be adversely affected or injured or benefited by the judgment in the
instant case. He also argues that the failure of service upon him of a copy of the
instant petition as well as petitioner's memorandum, and the fact that he was not
required or given the opportunity to file his comment or answer to the said petition
nor served with any order, resolution or any other process issued by this Court in
the instant petition, is a clear denial of his right to due process.
In his Comment and Opposition, petitioner contends that Robles has no legal
standing to participate in the instant petition. Petitioner argues that in an original
action for certiorari, the parties are the aggrieved party against the lower court and
the prevailing party. Petitioner claims, however, that Robles was never impleaded,
because he was not the prevailing party in the assailed Decision of the CA as well as
the questioned Order of the RTC. Petitioner further avers that the inclusion of
Robles' name as respondent in the caption of the instant petition was a result of a
clerical error which was probably brought about by numerous cases filed with this
Court involving Robles and the subject estate.
The Court finds partial merit in the instant motion.
Petitioner admitted in his Comment and Opposition to Robles' Motion that in the
instant petition he filed, only the CA and the RTC were impleaded as respondents.
Section 5, Rule 65 of the Rules of Court provides:
Section 5. Respondents and costs in certain cases. – When the petition filed relates
to the acts or omissions of a judge, court, quasi-judicial agency, tribunal,
corporation, board, officer or person, the petitioner shall join as private
respondent or respondents with such public respondent or respondents, the
person or persons interested in sustaining the proceedings in the court; and it
shall be the duty of such private respondents to appear and defend, both in his or
their own behalf and in behalf of the public respondent or respondents affected
by the proceedings, and the costs awarded in such proceedings in favor of the
petitioner shall be against the private respondents only, and not against the judge,
court, quasi-judicial agency, tribunal, corporation, board, officer or person
impleaded as public respondent or respondents.
Unless otherwise specifically directed by the court where the petition is pending,
the public respondents shall not appear in or file an answer or comment to the
petition or any pleading therein. If the case is elevated to a higher court by either
party, the public respondents shall be included therein as nominal parties.
However, unless otherwise specifically directed by the court, they shall not appear
or participate in the proceedings therein. 4
In Lotte Phil. Co., Inc. v. Dela Cruz,5 this Court ruled as follows:
An indispensable party is a party-in-interest without whom no final determination
can be had of an action, and who shall be joined either as plaintiffs or defendants.
The joinder of indispensable parties is mandatory. The presence of indispensable
parties is necessary to vest the court with jurisdiction, which is "the authority to
hear and determine a cause, the right to act in a case." Thus, without the presence
of indispensable parties to a suit or proceeding, judgment of a court cannot attain
real finality. The absence of an indispensable party renders all subsequent actions
of the court null and void for want of authority to act, not only as to the absent
parties but even as to those present.6
In the case at bar, Robles is an indispensable party. He stands to be injured or
benefited by the outcome of the petition. He has an interest in the controversy that
a final decree would necessarily affect his rights, such that the courts cannot
proceed without his presence.7 Moreover, as provided for under the aforequoted
Section 5, Rule 65 of the Rules of Court, Robles is interested in sustaining the
assailed CA Decision, considering that he would benefit from such judgment. As
such, his non-inclusion would render the petition for certiorari defective.8
Petitioner, thus, committed a mistake in failing to implead Robles as respondent.
The rule is settled that the non-joinder of indispensable parties is not a ground for
the dismissal of an action.9 The remedy is to implead the non-party claimed to be
indispensable.10 Parties may be added by order of the court on motion of the party
or on its own initiative at any stage of the action and/or at such times as are
just.11 If petitioner refuses to implead an indispensable party despite the order of
the court, the latter may dismiss the complaint/petition for the
plaintiff’s/petitioner's failure to comply therewith.12
Based on the foregoing, and in the interest of fair play, the Court finds it proper to
set aside its decision and allow Robles to file his comment on the petition.1avvphi1
WHEREFORE, the Motion for Reconsideration is PARTLY GRANTED. The Decision
dated December 4, 2009 is SET ASIDE. Petitioner is ORDERED to furnish Robles a
copy of his petition for certiorari within a period of five (5) days from receipt of this
Resolution. Thereafter, Robles is DIRECTED to file his comment on the petition
within a period of ten (10) days from notice.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 158298 August 11, 2010
ISIDRO ABLAZA, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
DECISION
BERSAMIN, J.:
Whether a person may bring an action for the declaration of the absolute nullity of
the marriage of his deceased brother solemnized under the regime of the old Civil
Code is the legal issue to be determined in this appeal brought by the petitioner
whose action for that purpose has been dismissed by the lower courts on the
ground that he, not being a party in the assailed marriage, had no right to bring the
action.
Antecedents
On October 17, 2000, the petitioner filed in the Regional Trial Court (RTC) in
Cataingan, Masbate a petition for the declaration of the absolute nullity of the
marriage contracted on December 26, 1949 between his late brother Cresenciano
Ablaza and Leonila Honato.1 The case was docketed as Special Case No. 117 entitled
In Re: Petition for Nullification of Marriage Contract between Cresenciano Ablaza
and Leonila Honato; Isidro Ablaza, petitioner.
The petitioner alleged that the marriage between Cresenciano and Leonila had
been celebrated without a marriage license, due to such license being issued only
on January 9, 1950, thereby rendering the marriage void ab initio for having been
solemnized without a marriage license. He insisted that his being the surviving
brother of Cresenciano who had died without any issue entitled him to one-half of
the real properties acquired by Cresenciano before his death, thereby making him a
real party in interest; and that any person, himself included, could impugn the
validity of the marriage between Cresenciano and Leonila at any time, even after
the death of Cresenciano, due to the marriage being void ab initio.2
Ruling of the RTC
On October 18, 2000, 3 the RTC dismissed the petition, stating:
Considering the petition for annulment of marriage filed, the Court hereby resolved
to DISMISS the petition for the following reasons: 1) petition is filed out of time
(action had long prescribed) and 2) petitioner is not a party to the marriage
(contracted between Cresenciano Ablaza and Leonila Nonato on December 26,
1949 and solemnized by Rev. Fr. Eusebio B. Calolot).
SO ORDERED.
The petitioner seasonably filed a motion for reconsideration, but the RTC denied
the motion for reconsideration on November 14, 2000.
Ruling of the Court of Appeals
The petitioner appealed to the Court of Appeals (CA), assigning the lone error that:
The trial court erred in dismissing the petition for being filed out of time and that
the petitioner is not a party to the marriage.
In its decision dated January 30, 2003,4 however, the CA affirmed the dismissal
order of the RTC, thus:
While an action to declare the nullity of a marriage considered void from the
beginning does not prescribe, the law nonetheless requires that the same action
must be filed by the proper party, which in this case should be filed by any of the
parties to the marriage. In the instant case, the petition was filed by Isidro Ablaza, a
brother of the deceased-spouse, who is not a party to the marriage contracted by
Cresenciano Ablaza and Leonila Honato. The contention of petitioner-appellant that
he is considered a real party in interest under Section 2, Rule 3 of the 1997 Rules of
Civil Procedure, as he stands to be benefited or injured by the judgment in the suit,
is simply misplaced. Actions for annulment of marriage will not prosper if persons
other than those specified in the law file the case.
Certainly, a surviving brother of the deceased spouse is not the proper party to file
the subject petition. More so that the surviving wife, who stands to be prejudiced,
was not even impleaded as a party to said case.
WHEREFORE, finding no reversible error therefrom, the Orders now on appeal are
hereby AFFIRMED. Costs against the petitioner-appellant.
SO ORDERED.5
Hence, this appeal.
Issues
The petitioner raises the following issues:
I.
WHETHER OR NOT THE DECISION OF THIS HONORABLE COURT OF APPEALS
IN CA-G.R. CV. NO. 69684 AFFIRMING THE ORDER OF DISMISSAL OF THE
REGIONAL TRIAL COURT, BRANCH 49 AT CATAINGAN, MASBATE IN SPECIAL
PROCEEDING NO. 117 IS IN ACCORDANCE WITH APPLICABLE LAWS AND
JURISPRUDENCE;
II.
WHETHER OR NOT THE DECISION OF THE HONORABLE COURT OF APPEALS
IN CA-G.R. CV NO. 69684 (SHOULD) BE REVERSED BASED ON EXECUTIVE
ORDER NO. 209 AND EXISTING JURISPRUDENCE.
The issues, rephrased, boil down to whether the petitioner is a real party in interest
in the action to seek the declaration of nullity of the marriage of his deceased
brother.
Ruling
The petition is meritorious.
A valid marriage is essential in order to create the relation of husband and wife and
to give rise to the mutual rights, duties, and liabilities arising out of such relation.
The law prescribes the requisites of a valid marriage. Hence, the validity of a
marriage is tested according to the law in force at the time the marriage is
contracted.6 As a general rule, the nature of the marriage already celebrated cannot
be changed by a subsequent amendment of the governing law.7 To illustrate, a
marriage between a stepbrother and a stepsister was void under the Civil Code, but
is not anymore prohibited under the Family Code; yet, the intervening effectivity of
the Family Code does not affect the void nature of a marriage between a
stepbrother and a stepsister solemnized under the regime of the Civil Code. The
Civil Code marriage remains void, considering that the validity of a marriage is
governed by the law in force at the time of the marriage ceremony.8
Before anything more, the Court has to clarify the impact to the issue posed herein
of Administrative Matter (A.M.) No. 02-11-10-SC (Rule on Declaration of Absolute
Nullity of Void Marriages and Annulment of Voidable Marriages), which took effect
on March 15, 2003.
Section 2, paragraph (a), of A.M. No. 02-11-10-SC explicitly provides the limitation
that a petition for declaration of absolute nullity of void marriage may be filed
solely by the husband or wife. Such limitation demarcates a line to distinguish
between marriages covered by the Family Code and those solemnized under the
regime of the Civil Code.9 Specifically, A.M. No. 02-11-10-SC extends only to
marriages covered by the Family Code, which took effect on August 3, 1988, but,
being a procedural rule that is prospective in application, is confined only to
proceedings commenced after March 15, 2003. 10
Based on Carlos v. Sandoval,11 the following actions for declaration of absolute
nullity of a marriage are excepted from the limitation, to wit:
1. Those commenced before March 15, 2003, the effectivity date of A.M.
No. 02-11-10-SC; and
2. Those filed vis-à-vis marriages celebrated during the effectivity of the
Civil Code and, those celebrated under the regime of the Family Code prior
to March 15, 2003.
Considering that the marriage between Cresenciano and Leonila was contracted on
December 26, 1949, the applicable law was the old Civil Code, the law in effect at
the time of the celebration of the marriage. Hence, the rule on the exclusivity of the
parties to the marriage as having the right to initiate the action for declaration of
nullity of the marriage under A.M. No. 02-11-10-SC had absolutely no application to
the petitioner.
The old and new Civil Codes contain no provision on who can file a petition to
declare the nullity of a marriage, and when. Accordingly, in Niñal v. Bayadog,12 the
children were allowed to file after the death of their father a petition for the
declaration of the nullity of their father’s marriage to their stepmother contracted
on December 11, 1986 due to lack of a marriage license. There, the Court
distinguished between a void marriage and a voidable one, and explained how and
when each might be impugned, thuswise:
Jurisprudence under the Civil Code states that no judicial decree is necessary in
order to establish the nullity of a marriage. "A void marriage does not require a
judicial decree to restore the parties to their original rights or to make the marriage
void but though no sentence of avoidance be absolutely necessary, yet as well for
the sake of good order of society as for the peace of mind of all concerned, it is
expedient that the nullity of the marriage should be ascertained and declared by
the decree of a court of competent jurisdiction." "Under ordinary circumstances,
the effect of a void marriage, so far as concerns the conferring of legal rights upon
the parties, is as though no marriage had ever taken place. And therefore, being
good for no legal purpose, its invalidity can be maintained in any proceeding in
which the fact of marriage may be material, either direct or collateral, in any civil
court between any parties at any time, whether before or after the death of either
or both the husband and the wife, and upon mere proof of the facts rendering such
marriage void, it will be disregarded or treated as non-existent by the courts." It is
not like a voidable marriage which cannot be collaterally attacked except in direct
proceeding instituted during the lifetime of the parties so that on the death of
either, the marriage cannot be impeached, and is made good ab initio. But Article
40 of the Family Code expressly provides that there must be a judicial declaration of
the nullity of a previous marriage, though void, before a party can enter into a
second marriage and such absolute nullity can be based only on a final judgment to
that effect. For the same reason, the law makes either the action or defense for the
declaration of absolute nullity of marriage imprescriptible. Corollarily, if the death
of either party would extinguish the cause of action or the ground for defense, then
the same cannot be considered imprescriptible.
However, other than for purposes of remarriage, no judicial action is necessary to
declare a marriage an absolute nullity. For other purposes, such as but not limited
to determination of heirship, legitimacy or illegitimacy of a child, settlement of
estate, dissolution of property regime, or a criminal case for that matter, the court
may pass upon the validity of marriage even in a suit not directly instituted to
question the same so long as it is essential to the determination of the case. This is
without prejudice to any issue that may arise in the case. When such need arises, a
final judgment of declaration of nullity is necessary even if the purpose is other than
to remarry. The clause "on the basis of a final judgment declaring such previous
marriage void" in Article 40 of the Family Code connotes that such final judgment
need not be obtained only for purpose of remarriage. 13
It is clarified, however, that the absence of a provision in the old and new Civil
Codes cannot be construed as giving a license to just any person to bring an action
to declare the absolute nullity of a marriage. According to Carlos v. Sandoval,14 the
plaintiff must still be the party who stands to be benefited by the suit, or the party
entitled to the avails of the suit, for it is basic in procedural law that every action
must be prosecuted and defended in the name of the real party in interest. 15 Thus,
only the party who can demonstrate a "proper interest" can file the
action.16Interest within the meaning of the rule means material interest, or an
interest in issue to be affected by the decree or judgment of the case, as
distinguished from mere curiosity about the question involved or a mere incidental
interest. One having no material interest to protect cannot invoke the jurisdiction of
the court as plaintiff in an action. When the plaintiff is not the real party in interest,
the case is dismissible on the ground of lack of cause of action. 17
Here, the petitioner alleged himself to be the late Cresenciano’s brother and
surviving heir. Assuming that the petitioner was as he claimed himself to be, then
he has a material interest in the estate of Cresenciano that will be adversely
affected by any judgment in the suit. Indeed, a brother like the petitioner, albeit not
a compulsory heir under the laws of succession, has the right to succeed to the
estate of a deceased brother under the conditions stated in Article 1001 and Article
1003 of the Civil Code, as follows:
Article 1001. Should brothers and sisters or their children survive with the widow or
widower, the latter shall be entitled to one half of the inheritance and the brothers
and sisters or their children to the other half.
Article 1003. If there are no descendants, ascendants, illegitimate children, or a
surviving spouse, the collateral relatives shall succeed to the entire estate of the
deceased in accordance with the following articles.
Pursuant to these provisions, the presence of descendants, ascendants, or
illegitimate children of the deceased excludes collateral relatives like the petitioner
from succeeding to the deceased’s estate.18 Necessarily, therefore, the right of the
petitioner to bring the action hinges upon a prior determination of whether
Cresenciano had any descendants, ascendants, or children (legitimate or
illegitimate), and of whether the petitioner was the late Cresenciano’s surviving
heir. Such prior determination must be made by the trial court, for the inquiry
thereon involves questions of fact.
As can be seen, both the RTC and the CA erroneously resolved the issue presented
in this case. We reverse their error, in order that the substantial right of the
petitioner, if any, may not be prejudiced.
Nevertheless, we note that the petitioner did not implead Leonila, who, as the late
Cresenciano’s surviving wife,19stood to be benefited or prejudiced by the
nullification of her own marriage. It is relevant to observe, moreover, that not all
marriages celebrated under the old Civil Code required
a marriage license for their validity;20 hence, her participation in this action is made
all the more necessary in order to shed light on whether the marriage had been
celebrated without a marriage license and whether the marriage might have been a
marriage excepted from the requirement of a marriage license. She was truly an
indispensable party who must be joined herein:
xxx under any and all conditions, [her] presence being a sine qua non for the No costs of suit.
exercise of judicial power.1avvphi1 It is precisely "when an indispensable party is
not before the court [that] the action should be dismissed." The absence of an SO ORDERED.
indispensable party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as to those Republic of the Philippines
present.21 SUPREME COURT
Manila
We take note, too, that the petitioner and Leonila were parties in C.A.-G.R. CV No.
91025 entitled Heirs of Cresenciano Ablaza, namely: Leonila G. Ablaza and Leila THIRD DIVISION
Ablaza Jasul v. Spouses Isidro and Casilda Ablaza, an action to determine who
between the parties were the legal owners of the property involved therein.
G.R. No. 178411 June 23, 2010
Apparently, C.A.-G.R. CV No. 91025 was decided on November 26, 2009, and the
petitioner’s motion for reconsideration was denied on June 23, 2010. As a
OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, OFFICE OF THE CITY
defendant in that action, the petitioner is reasonably presumed to have knowledge
ADMINISTRATOR OF PARAÑAQUE CITY, OFFICE OF THE CITY ENGINEER OF
that the therein plaintiffs, Leonila and Leila, were the wife and daughter,
PARAÑAQUE CITY, OFFICE OF THE CITY PLANNING AND DEVELOPMENT
respectively, of the late Cresenciano. As such, Leila was another indispensable party
COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN AND SANGGUNIANG
whose substantial right any judgment in this action will definitely affect. The
PAMBARANGAY OF BARANGAY VITALEZ, PARAÑAQUE CITY, TERESITA A.
petitioner should likewise implead Leila.
GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL M.
ARGOTE, CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L. GONZALES,
The omission to implead Leonila and Leila was not immediately fatal to the present
ESTER C. ASEHAN, MANUEL A. FUENTES, and MYRNA P. ROSALES, Petitioners,
action, however, considering that Section 11,22 Rule 3, Rules of Court, states that
vs.
neither misjoinder nor non-joinder of parties is a ground for the dismissal of an
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO, EDUARDO V.
action. The petitioner can still amend his initiatory pleading in order to implead her,
EBIO, RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V. EBIO, and ARNEL V.
for under the same rule, such amendment to implead an indispensable party may
EBIO, Respondents.
be made "on motion of any party or on (the trial court’s) own initiative at any stage
of the action and on such terms as are just."
DECISION
WHEREFORE, the petition for review on certiorari is granted.
VILLARAMA, JR., J.:
We reverse and set aside the decision dated January 30, 2003 rendered by the
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Court of Appeals.
Civil Procedure, as amended, assailing the January 31, 2007 Decision1 and June 8,
2007 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly for
Special Case No. 117 entitled In Re: Petition for Nullification of Marriage Contract
being contrary to law and jurisprudence. The CA had reversed the Order 3 of the
between Cresenciano Ablaza and Leonila Honato; Isidro Ablaza, petitioner, is
Regional Trial Court (RTC) of Parañaque City, Branch 196, issued on April 29, 2005 in
reinstated, and its records are returned to the Regional Trial Court, Branch 49, in
Civil Case No. 05-0155.
Cataingan, Masbate, for further proceedings, with instructions to first require the
petitioner to amend his initiatory pleading in order to implead Leonila Honato and
Below are the facts.
her daughter Leila Ablaza Jasul as parties-defendants; then to determine whether
the late Cresenciano Ablaza had any ascendants, descendants, or children
(legitimate or illegitimate) at the time of his death as well as whether the petitioner Respondents claim that they are the absolute owners of a parcel of land consisting
was the brother and surviving heir of the late Cresenciano Ablaza entitled to of 406 square meters, more or less, located at 9781 Vitalez Compound in Barangay
succeed to the estate of said deceased; and thereafter to proceed accordingly. Vitalez, Parañaque City and covered by Tax Declaration Nos. 01027 and 01472 in
the name of respondent Mario D. Ebio. Said land was an accretion of Cut-cut creek.
Respondents assert that the original occupant and possessor of the said parcel of
land was their great grandfather, Jose Vitalez. Sometime in 1930, Jose gave the land
to his son, Pedro Vitalez. From then on, Pedro continuously and exclusively
occupied and possessed the said lot. In 1966, after executing an affidavit declaring
possession and occupancy,4 Pedro was able to obtain a tax declaration over the said
property in his name.5 Since then, respondents have been religiously paying real
property taxes for the said property.6
Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida.
Upon Pedro’s advice, the couple established their home on the said lot. In April
1964 and in October 1971, Mario Ebio secured building permits from the Parañaque
municipal office for the construction of their house within the said compound. 7 On
April 21, 1987, Pedro executed a notarized Transfer of Rights8 ceding his claim over
the entire parcel of land in favor of Mario Ebio. Subsequently, the tax declarations
under Pedro’s name were cancelled and new ones were issued in Mario Ebio’s
name.9
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed
Resolution No. 08, series of 199910seeking assistance from the City Government of
Parañaque for the construction of an access road along Cut-cut Creek located in the
said barangay. The proposed road, projected to be eight (8) meters wide and sixty
(60) meters long, will run from Urma Drive to the main road of Vitalez
Compound11 traversing the lot occupied by the respondents. When the city
government advised all the affected residents to vacate the said area, respondents
immediately registered their opposition thereto. As a result, the road project was
temporarily suspended.12
In January 2003, however, respondents were surprised when several officials from
the barangay and the city planning office proceeded to cut eight (8) coconut trees
planted on the said lot. Respondents filed letter-complaints before the Regional
Director of the Bureau of Lands, the Department of Interior and Local Government
and the Office of the Vice Mayor.13 On June 29, 2003, the Sangguniang Barangay of
Vitalez held a meeting to discuss the construction of the proposed road. In the said
meeting, respondents asserted their opposition to the proposed project and their
claim of ownership over the affected property.14 On November 14, 2003,
respondents attended another meeting with officials from the city government, but
no definite agreement was reached by and among the parties. 15
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents
ordering them to vacate the area within the next thirty (30) days, or be physically
evicted from the said property.16 Respondents sent a letter to the Office of the City
Administrator asserting, in sum, their claim over the subject property and
expressing intent for a further dialogue.17 The request remained
unheeded.1avvphi1
Threatened of being evicted, respondents went to the RTC of Parañaque City on
April 21, 2005 and applied for a writ of preliminary injunction against
petitioners.18 In the course of the proceedings, respondents admitted before the
trial court that they have a pending application for the issuance of a sales patent
before the Department of Environment and Natural Resources (DENR). 19
On April 29, 2005, the RTC issued an Order20 denying the petition for lack of merit.
The trial court reasoned that respondents were not able to prove successfully that
they have an established right to the property since they have not instituted an
action for confirmation of title and their application for sales patent has not yet
been granted. Additionally, they failed to implead the Republic of the Philippines,
which is an indispensable party.
Respondents moved for reconsideration, but the same was denied. 21
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31,
2007, the Court of Appeals issued its Decision in favor of the respondents.
According to the Court of Appeals--
The issue ultimately boils down to the question of ownership of the lands adjoining
Cutcut Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion
beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area of
291 square meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-
62176. The same RL 8 appears to have been donated by the Guaranteed Homes to
the City Government of Parañaque on 22 March 1966 and which was accepted by
the then Mayor FLORENCIO BERNABE on 5 April 1966. There is no evidence
however, when RL 8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed
the accreted property since 1930 per his Affidavit dated 21 March 1966 for the
purpose of declaring the said property for taxation purposes. The property then
became the subject of Tax Declaration No. 20134 beginning the year 1967 and the
real property taxes therefor had been paid for the years 1966, 1967, 1968, 1969,
1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996, 1997, 1998, 1999, 2000, 2001,
2002, 2003, and 2004. Sometime in 1964 and 1971, construction permits were
issued in favor of Appellant MARIO EBIO for the subject property. On 21 April 1987,
PEDRO VITALEZ transferred his rights in the accreted property to MARIO EBIO and
his successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary
evidence, it could be concluded that Guaranteed Homes is the owner of the
accreted property considering its ownership of the adjoining RL 8 to which the
accretion attached. However, this is without the application of the provisions of the
Civil Code on acquisitive prescription which is likewise applicable in the instant case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion
which [was] duly proven by the Appellants. It is clear that since 1930, Appellants
together with their predecessor-in-interest, PEDRO VITALEZ[,] have been in
exclusive possession of the subject property and starting 1964 had introduced
improvements thereon as evidenced by their construction permits. Thus, even by
extraordinary acquisitive prescription[,] Appellants have acquired ownership of the
property in question since 1930 even if the adjoining RL 8 was subsequently
registered in the name of Guaranteed Homes. x x x.
xxxx
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8
registered in its name, which is almost fifty years from the time PEDRO VITALEZ
occupied the adjoining accreted property in 1930. x x x.
xxxx
We likewise note the continuous payment of real property taxes of Appellants
which bolster their right over the subject property. x x x.
xxxx
In sum, We are fully convinced and so hold that the Appellants [have] amply proven
their right over the property in question.
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The
challenged Order of the court a quo is REVERSED and SET ASIDE.
22
SO ORDERED.
On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration.
Hence, this petition raising the following assignment of errors:
I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT
OF APPEALS THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN ACCORD WITH THE
LAW AND ESTABLISHED JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT
OF APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR ACQUISITIVE PRESCRIPTION
IS IN ACCORD WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;] AND
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE COMPLAINT
… FILED BY RESPONDENTS IN THE LOWER COURT. 23
The issues may be narrowed down into two (2): procedurally, whether the State is
an indispensable party to respondents’ action for prohibitory injunction; and
substantively, whether the character of respondents’ possession and occupation of
the subject property entitles them to avail of the relief of prohibitory injunction.
The petition is without merit.
An action for injunction is brought specifically to restrain or command the
performance of an act.24 It is distinct from the ancillary remedy of preliminary
injunction, which cannot exist except only as part or as an incident to an
independent action or proceeding. Moreover, in an action for injunction, the
auxiliary remedy of a preliminary prohibitory or mandatory injunction may issue.25
In the case at bar, respondents filed an action for injunction to prevent the local
government of Parañaque City from proceeding with the construction of an access
road that will traverse through a parcel of land which they claim is owned by them
by virtue of acquisitive prescription.
Petitioners, however, argue that since the creek, being a tributary of the river, is
classified as part of the public domain, any land that may have formed along its
banks through time should also be considered as part of the public domain. And
respondents should have included the State as it is an indispensable party to the
action.
We do not agree.
It is an uncontested fact that the subject land was formed from the alluvial deposits
that have gradually settled along the banks of Cut-cut creek. This being the case,
the law that governs ownership over the accreted portion is Article 84 of
the Spanish Law of Waters of 1866, which remains in effect,26 in relation to Article
457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over
alluvial deposits along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams,
rivers, and lakes, by accessions or sediments from the waters thereof, belong to the
owners of such lands.27
Interestingly, Article 457 of the Civil Code states:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion
which they gradually receive from the effects of the current of the waters.
It is therefore explicit from the foregoing provisions that alluvial deposits along the
banks of a creek do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been added.
The only restriction provided for by law is that the owner of the adjoining property
must register the same under the Torrens system; otherwise, the alluvial property
may be subject to acquisition through prescription by third persons. 28
In contrast, properties of public dominion cannot be acquired by prescription. No
matter how long the possession of the properties has been, there can be no
prescription against the State regarding property of public domain. 29 Even a city or
municipality cannot acquire them by prescription as against the State.30
Hence, while it is true that a creek is a property of public dominion, 31 the land which
is formed by the gradual and imperceptible accumulation of sediments along its
banks does not form part of the public domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is such
that a final decree would necessarily affect his/her right, so that the court cannot
proceed without their presence.32 In contrast, a necessary party is one whose
presence in the proceedings is necessary to adjudicate the whole controversy but
whose interest is separable such that a final decree can be made in their absence
without affecting them.33
In the instant case, the action for prohibition seeks to enjoin the city government of
Parañaque from proceeding with its implementation of the road construction
project. The State is neither a necessary nor an indispensable party to an action
where no positive act shall be required from it or where no obligation shall be
imposed upon it, such as in the case at bar. Neither would it be an indispensable
party if none of its properties shall be divested nor any of its rights infringed.
We also find that the character of possession and ownership by the respondents
over the contested land entitles them to the avails of the action.
A right in esse means a clear and unmistakable right.34 A party seeking to avail of an
injunctive relief must prove that he or she possesses a right in esse or one that is
actual or existing.35 It should not be contingent, abstract, or future rights, or one
which may never arise.36
In the case at bar, respondents assert that their predecessor-in-interest, Pedro
Vitalez, had occupied and possessed the subject lot as early as 1930. In 1964,
respondent Mario Ebio secured a permit from the local government of Parañaque
for the construction of their family dwelling on the said lot. In 1966, Pedro executed
an affidavit of possession and occupancy allowing him to declare the property in his
name for taxation purposes. Curiously, it was also in 1966 when Guaranteed
Homes, Inc., the registered owner of Road Lot No. 8 (RL 8) which adjoins the land
occupied by the respondents, donated RL 8 to the local government of Parañaque.
From these findings of fact by both the trial court and the Court of Appeals, only
one conclusion can be made: that for more than thirty (30) years, neither
Guaranteed Homes, Inc. nor the local government of Parañaque in its corporate or
private capacity sought to register the accreted portion. Undoubtedly, respondents
are deemed to have acquired ownership over the subject property through
prescription. Respondents can assert such right despite the fact that they have yet
to register their title over the said lot. It must be remembered that the purpose of
land registration is not the acquisition of lands, but only the registration of title
which the applicant already possessed over the land. Registration was never
intended as a means of acquiring ownership. 37 A decree of registration merely
confirms, but does not confer, ownership.38
Did the filing of a sales patent application by the respondents, which remains
pending before the DENR, estop them from filing an injunction suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel of land may be done either through
judicial proceedings or through administrative process. In the instant case,
respondents admitted that they opted to confirm their title over the property
administratively by filing an application for sales patent.
Respondents’ application for sales patent, however, should not be used to
prejudice or derogate what may be deemed as their vested right over the subject
property. The sales patent application should instead be considered as a mere
superfluity particularly since ownership over the land, which they seek to buy from
the State, is already vested upon them by virtue of acquisitive prescription.
Moreover, the State does not have any authority to convey a property through the
issuance of a grant or a patent if the land is no longer a public land. 39
Nemo dat quod dat non habet. No one can give what he does not have. Such
principle is equally applicable even against a sovereign entity that is the State.
WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007
Decision, as well as the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R.
SP No. 91350 are hereby AFFIRMED.
With costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 171101 July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG
MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL
MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE HACIENDA
LUISITA, INC. and WINDSOR ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry doubtless has received with
much misgiving, if not resistance, even if only the number of agrarian suits filed
serves to be the norm. Through the years, this battle cry and root of discord
continues to reflect the seemingly ceaseless discourse on, and great disparity in, the
distribution of land among the people, "dramatizing the increasingly urgent
demand of the dispossessed x x x for a plot of earth as their place in the sun." 2 As
administrations and political alignments change, policies advanced, and agrarian
reform laws enacted, the latest being what is considered a comprehensive piece,
the face of land reform varies and is masked in myriads of ways. The stated goal,
however, remains the same: clear the way for the true freedom of the farmer. 3
Land reform, or the broader term "agrarian reform," has been a government policy
even before the Commonwealth era. In fact, at the onset of the American regime,
initial steps toward land reform were already taken to address social unrest. 4 Then,
under the 1935 Constitution, specific provisions on social justice and expropriation
of landed estates for distribution to tenants as a solution to land ownership and
tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in
motion the expropriation of all tenanted estates.5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was
enacted,6 abolishing share tenancy and converting all instances of share tenancy
into leasehold tenancy.7 RA 3844 created the Land Bank of the Philippines (LBP) to
provide support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in
rice and corn, supposedly to be accomplished by expropriating lands in excess of 75
hectares for their eventual resale to tenants. The law, however, had this restricting
feature: its operations were confined mainly to areas in Central Luzon, and its
implementation at any level of intensity limited to the pilot project in Nueva Ecija. 8
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring
the entire country a land reform area, and providing for the automatic conversion
of tenancy to leasehold tenancy in all areas. From 75 hectares, the retention limit
was cut down to seven hectares.9
Barely a month after declaring martial law in September 1972, then President
Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for the "emancipation
of the tiller from the bondage of the soil."10 Based on this issuance, tenant-farmers,
depending on the size of the landholding worked on, can either purchase the land
they tilled or shift from share to fixed-rent leasehold tenancy.11 While touted as
"revolutionary," the scope of the agrarian reform program PD 27 enunciated
covered only tenanted, privately-owned rice and corn lands.12
Then came the revolutionary government of then President Corazon C. Aquino and
the drafting and eventual ratification of the 1987 Constitution. Its provisions
foreshadowed the establishment of a legal framework for the formulation of an
expansive approach to land reform, affecting all agricultural lands and covering
both tenant-farmers and regular farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a
comprehensive agrarian reform program (CARP) to cover all agricultural lands,
regardless of tenurial arrangement and commodity produced, as provided in the
Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its
title14 indicates, the mechanisms for CARP implementation. It created the
Presidential Agrarian Reform Council (PARC) as the highest policy-making body that
formulates all policies, rules, and regulations necessary for the implementation of
CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988,
also known as CARL or the CARP Law, took effect, ushering in a new process of land
classification, acquisition, and distribution. As to be expected, RA 6657 met stiff
opposition, its validity or some of its provisions challenged at every possible
turn. Association of Small Landowners in the Philippines, Inc. v. Secretary of
Agrarian Reform 15 stated the observation that the assault was inevitable, the CARP
being an untried and untested project, "an experiment [even], as all life is an
experiment," the Court said, borrowing from Justice Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for
preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and seeks
to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 2006-34-
0117 issued on December 22, 2005 and May 3, 2006, respectively, as well as the
implementing Notice of Coverage dated January 2, 2006 (Notice of Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a
6,443-hectare mixed agricultural-industrial-residential expanse straddling several
municipalities of Tarlac and owned by Compañia General de Tabacos de Filipinas
(Tabacalera). In 1957, the Spanish owners of Tabacalera offered to sell Hacienda
Luisita as well as their controlling interest in the sugar mill within the hacienda, the
Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac
Development Corporation (Tadeco), then owned and/or controlled by the Jose
Cojuangco, Sr. Group, was willing to buy. As agreed upon, Tadeco undertook to pay
the purchase price for Hacienda Luisita in pesos, while that for the controlling
interest in CAT, in US dollars.19
To facilitate the adverted sale-and-purchase package, the Philippine government,
through the then Central Bank of the Philippines, assisted the buyer to obtain a
dollar loan from a US bank.20 Also, the Government Service Insurance System (GSIS)
Board of Trustees extended on November 27, 1957 a PhP 5.911 million loan in favor
of Tadeco to pay the peso price component of the sale. One of the conditions
contained in the approving GSIS Resolution No. 3203, as later amended by
Resolution No. 356, Series of 1958, reads as follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-
corporation and sold at cost to the tenants, should there be any, and whenever
conditions should exist warranting such action under the provisions of the Land
Tenure Act;21
As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition
of Hacienda Luisita and Tabacalera’s interest in CAT.22
The details of the events that happened next involving the hacienda and the
political color some of the parties embossed are of minimal significance to this
narration and need no belaboring. Suffice it to state that on May 7, 1980, the
martial law administration filed a suit before the Manila Regional Trial Court (RTC)
against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry
of Agrarian Reform (MAR, now the Department of Agrarian Reform [DAR]) so that
the land can be distributed to farmers at cost. Responding, Tadeco or its owners
alleged that Hacienda Luisita does not have tenants, besides which sugar lands––of
which the hacienda consisted––are not covered by existing agrarian reform
legislations. As perceived then, the government commenced the case against
Tadeco as a political message to the family of the late Benigno Aquino, Jr.23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender
Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of Appeals
(CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw
the government’s case against Tadeco, et al. By Resolution of May 18, 1988, the CA
dismissed the case the Marcos government initially instituted and won against
Tadeco, et al. The dismissal action was, however, made subject to the obtention by
Tadeco of the PARC’s approval of a stock distribution plan (SDP) that must initially
be implemented after such approval shall have been secured.24 The appellate court
wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x
governmental agencies concerned in moving for the dismissal of the case subject,
however, to the following conditions embodied in the letter dated April 8, 1988
(Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan for
failure to comply with all the requirements for corporate landowners set
forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails to
initially implement it.
xxxx
WHEREFORE, the present case on appeal is hereby dismissed without prejudice,
and should be revived if any of the conditions as above set forth is not duly
complied with by the TADECO.25
Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to
the actual land transfer scheme of CARP, to give qualified beneficiaries the right to
purchase shares of stocks of the corporation under a stock ownership arrangement
and/or land-to-share ratio.
Like EO 229, RA 6657, under the latter’s Sec. 31, also provides two (2) alternative
modalities, i.e., land or stock transfer, pursuant to either of which the corporate
landowner can comply with CARP, but subject to well-defined conditions and
timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer
ownership over their agricultural landholdings to the Republic of the Philippines
pursuant to Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the capital
stock of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the company’s total assets, under such terms and
conditions as may be agreed upon by them. In no case shall the compensation
received by the workers at the time the shares of stocks are distributed be reduced.
xxx
Corporations or associations which voluntarily divest a proportion of their capital
stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or executive
committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the
same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be
void ab initio unless said transaction is in favor of a qualified and registered
beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or stock
transfer envisioned above is not made or realized or the plan for such stock
distribution approved by the PARC within the same period, the agricultural land of
the corporate owners or corporation shall be subject to the compulsory coverage of
this Act. (Emphasis added.)
Vis-à-vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued
Administrative Order No. 10, Series of 1988 (DAO 10), 27 entitled Guidelines and
Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock
Distribution Plan under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be Tadeco’s preferred
option, for, on August 23, 1988,28 it organized a spin-off corporation, HLI, as vehicle
to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco assigned
and conveyed to HLI the agricultural land portion (4,915.75 hectares) and other
farm-related properties of Hacienda Luisita in exchange for HLI shares of stock. 29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz
C. Teopaco were the incorporators of HLI.30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the
Securities and Exchange Commission’s (SEC’s) approval, increased its capital stock
on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with a par value
of PhP 1/share to PhP 400,000,000 divided into 400,000,000 shares also with par
value of PhP 1/share, 150,000,000 of which were to be issued only to qualified and
registered beneficiaries of the CARP, and the remaining 250,000,000 to any
stockholder of the corporation.31
As appearing in its proposed SDP, the properties and assets of Tadeco contributed
to the capital stock of HLI, as appraised and approved by the SEC, have an aggregate
value of PhP 590,554,220, or after deducting the total liabilities of the farm
amounting to PhP 235,422,758, a net value of PhP 355,531,462. This translated to
355,531,462 shares with a par value of PhP 1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of the
proposed HLI’s Stock Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a Memorandum of Agreement
(MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs34 and
attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis and
mechanics of the SDP, which would eventually be submitted to the PARC for
approval. In the SDOA, the parties agreed to the following:
1. The percentage of the value of the agricultural land of Hacienda Luisita
(P196,630,000.00) in relation to the total assets (P590,554,220.00)
transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that,
under the law, is the proportion of the outstanding capital stock of the
SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a
par value of P1.00 per share, that has to be distributed to the THIRD PARTY
[FWBs] under the stock distribution plan, the said 33.296% thereof being
P118,391,976.85 or 118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the
farmworkers who appear in the annual payroll, inclusive of the permanent
and seasonal employees, who are regularly or periodically employed by
the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the SECOND
PARTY shall arrange with the FIRST PARTY [Tadeco] the acquisition and
distribution to the THIRD PARTY on the basis of number of days worked
and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of
the capital stock of the SECOND PARTY that are presently owned and held
by the FIRST PARTY, until such time as the entire block of 118,391,976.85
shares shall have been completely acquired and distributed to the THIRD
PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the
[SDP] that every year they will receive on top of their regular
compensation, an amount that approximates the equivalent of three (3%)
of the total gross sales from the production of the agricultural land,
whether it be in the form of cash dividends or incentive bonuses or both.
5. Even if only a part or fraction of the shares earmarked for distribution
will have been acquired from the FIRST PARTY and distributed to the THIRD
PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an
irrevocable proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of the SECOND PARTY at the start
of said year which will empower the THIRD PARTY or their representative
to vote in stockholders’ and board of directors’ meetings of the SECOND
PARTY convened during the year the entire 33.296% of the outstanding
capital stock of the SECOND PARTY earmarked for distribution and thus be
able to gain such number of seats in the board of directors of the SECOND
PARTY that the whole 33.296% of the shares subject to distribution will be
entitled to.
6. In addition, the SECOND PARTY shall within a reasonable time subdivide
and allocate for free and without charge among the qualified family-
beneficiaries residing in the place where the agricultural land is situated,
residential or homelots of not more than 240 sq.m. each, with each family-
beneficiary being assured of receiving and owning a homelot in the
barangay where it actually resides on the date of the execution of this
Agreement.
7. This Agreement is entered into by the parties in the spirit of the
(C.A.R.P.) of the government and with the supervision of the [DAR], with
the end in view of improving the lot of the qualified beneficiaries of the
[SDP] and obtaining for them greater benefits. (Emphasis added.)
As may be gleaned from the SDOA, included as part of the distribution plan are: (a)
production-sharing equivalent to three percent (3%) of gross sales from the
production of the agricultural land payable to the FWBs in cash dividends or
incentive bonus; and (b) distribution of free homelots of not more than 240 square
meters each to family-beneficiaries. The production-sharing, as the SDP indicated, is
payable "irrespective of whether [HLI] makes money or not," implying that the
benefits do not partake the nature of dividends, as the term is ordinarily
understood under corporation law.
While a little bit hard to follow, given that, during the period material, the assigned
value of the agricultural land in the hacienda was PhP 196.63 million, while the total
assets of HLI was PhP 590.55 million with net assets of PhP 355.53 million,
Tadeco/HLI would admit that the ratio of the land-to-shares of stock corresponds to
33.3% of the outstanding capital stock of the HLI equivalent to 118,391,976.85
shares of stock with a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock
Distribution under C.A.R.P.,"35which was substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117
FWBs, out of 5,315 who participated, opted to receive shares in HLI. 36 One hundred
thirty-two (132) chose actual land distribution.37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec.
Defensor-Santiago) addressed a letter dated November 6, 198938 to Pedro S.
Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be revised,
along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall
ensure that there will be no dilution in the shares of stocks of individual
[FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution
of the percentage shareholdings of the [FWBs], i.e., that the 33%
shareholdings of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in the
[MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the
implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms for
determining the actual number of seats to be allocated for the [FWBs] in
the HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of
homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly
provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI
explained that the proposed revisions of the SDP are already embodied in both the
SDP and MOA.39 Following that exchange, the PARC, under then Sec. Defensor-
Santiago, by Resolution No. 89-12-240 dated November 21, 1989, approved the SDP
of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296,
more or less, composed of permanent, seasonal and casual master list/payroll and
non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the
FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe
benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500
hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80
hectares at 80 million pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death benefits and no
interest bearing salary/educational loans and rice sugar accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the
hacienda from agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657,
providing:
SEC. 65. Conversion of Lands.¾After the lapse of five (5) years from its award, when
the land ceases to be economically feasible and sound for agricultural purposes, or
the locality has become urbanized and the land will have a greater economic value
for residential, commercial or industrial purposes, the DAR, upon application of the
beneficiary or the landowner, with due notice to the affected parties, and subject to
existing laws, may authorize the reclassification, or conversion of the land and its
disposition: Provided, That the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs, including
respondent Rene Galang, and Jose Julio Suniga, as evidenced by the Manifesto of
Support they signed and which was submitted to the DAR.44After the usual
processing, the DAR, thru then Sec. Ernesto Garilao, approved the application on
August 14, 1996, per DAR Conversion Order No. 030601074-764-(95), Series of
1996,45 subject to payment of three percent (3%) of the gross selling price to the
FWBs and to HLI’s continued compliance with its undertakings under the SDP,
among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of
stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the
converted area to the latter.46 Consequently, HLI’s Transfer Certificate of Title (TCT)
No. 28791047 was canceled and TCT No. 29209148 was issued in the name of
Centennary. HLI transferred the remaining 200 hectares covered by TCT No. 287909
to Luisita Realty Corporation (LRC)49 in two separate transactions in 1997 and 1998,
both uniformly involving 100 hectares for PhP 250 million each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000
divided into 12,100,000 shares and wholly-owned by HLI, had the following
incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G.
Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park
Corporation (LIPCO) for PhP 750 million. The latter acquired it for the purpose of
developing an industrial complex.52 As a result, Centennary’s TCT No. 292091 was
canceled to be replaced by TCT No. 31098653 in the name of LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for which
two (2) separate titles were issued in the name of LIPCO, specifically: (a) TCT No.
36580054 and (b) TCT No. 365801,55 covering 180 and four hectares, respectively.
TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO
transferred the parcels covered by its TCT Nos. 365800 and 365801 to the Rizal
Commercial Banking Corporation (RCBC) by way of dacion en pago in payment of
LIPCO’s PhP 431,695,732.10 loan obligations. LIPCO’s titles were canceled and new
ones, TCT Nos. 391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later
detached from the area coverage of Hacienda Luisita which had been acquired by
the government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. In
absolute terms, 4,335.75 hectares remained of the original 4,915 hectares Tadeco
ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both undated,
reached the DAR in the latter part of 2003. In the first, denominated as
Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya, identifying
themselves as head of the Supervisory Group of HLI (Supervisory Group), and 60
other supervisors sought to revoke the SDOA, alleging that HLI had failed to give
them their dividends and the one percent (1%) share in gross sales, as well as the
thirty-three percent (33%) share in the proceeds of the sale of the converted 500
hectares of land. They further claimed that their lives have not improved contrary
to the promise and rationale for the adoption of the SDOA. They also cited
violations by HLI of the SDOA’s terms.58 They prayed for a renegotiation of the
SDOA, or, in the alternative, its revocation.
Revocation and nullification of the SDOA and the distribution of the lands in the
hacienda were the call in the second petition, styled as Petisyon (Petition).59 The
Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga
Manggagawang Bukid ng Hacienda Luisita (AMBALA), where the handwritten name
of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "Sec-Gen.
AMBALA"60 appeared. As alleged, the petition was filed on behalf of AMBALA’s
members purportedly composing about 80% of the 5,339 FWBs of Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group. On
the other hand, HLI’s answer62 to the AMBALA petition was contained in its letter
dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to
the SDP of HLI. Among other duties, the Special Task Force was mandated to review
the terms and conditions of the SDOA and PARC Resolution No. 89-12-2 relative to
HLI’s SDP; evaluate HLI’s compliance reports; evaluate the merits of the petitions
for the revocation of the SDP; conduct ocular inspections or field investigations; and
recommend appropriate remedial measures for approval of the Secretary. 63
After investigation and evaluation, the Special Task Force submitted its "Terminal
Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan (SDP)
Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI has not
complied with its obligations under RA 6657 despite the implementation of the
SDP.65 The Terminal Report and the Special Task Force’s recommendations were
adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee
(Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2 dated November
21, 1989 approving HLI’s SDP; and (b) the acquisition of Hacienda Luisita through
the compulsory acquisition scheme. Following review, the PARC Validation
Committee favorably endorsed the DAR Secretary’s recommendation afore-
stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01,
disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED,
to approve and confirm the recommendation of the PARC Executive Committee
adopting in toto the report of the PARC ExCom Validation Committee affirming the
recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development
Corporation/Hacienda Luisita Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan
be forthwith placed under the compulsory coverage or mandated land acquisition
scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the resolution
attached. A letter-request dated December 28, 200569 for certified copies of said
documents was sent to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration. 70 On the same day, the
DAR Tarlac provincial office issued the Notice of Coverage71 which HLI received on
January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what it
considers as the DAR’s hasty placing of Hacienda Luisita under CARP even before
PARC could rule or even read the motion for reconsideration.72 As HLI later rued, it
"can not know from the above-quoted resolution the facts and the law upon which
it is based."73
PARC would eventually deny HLI’s motion for reconsideration via Resolution No.
2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLI’s motion, issued a
temporary restraining order,75enjoining the implementation of Resolution No.
2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its
Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity
as "Sec-Gen. AMBALA," filed his Manifestation and Motion with Comment Attached
dated December 4, 2006 (Manifestation and Motion).77 In it, Mallari stated that he
has broken away from AMBALA with other AMBALA ex-members and formed
Farmworkers Agrarian Reform Movement, Inc. (FARM).78 Should this shift in alliance
deny him standing, Mallari also prayed that FARM be allowed to intervene.
As events would later develop, Mallari had a parting of ways with other FARM
members, particularly would-be intervenors Renato Lalic, et al. As things stand,
Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari faction and
leaving Renato Lalic, et al. as the remaining members of FARM who sought to
intervene.
On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang faction
submitted their Comment/Opposition dated December 17, 2006.80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and
Admit Attached Petition-In-Intervention dated October 18, 2007.81 LIPCO later
followed with a similar motion.82 In both motions, RCBC and LIPCO contended that
the assailed resolution effectively nullified the TCTs under their respective names as
the properties covered in the TCTs were veritably included in the January 2, 2006
notice of coverage. In the main, they claimed that the revocation of the SDP cannot
legally affect their rights as innocent purchasers for value. Both motions for leave to
intervene were granted and the corresponding petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on oral
arguments. On the other hand, the Court, on August 24, 2010, heard public
respondents as well as the respective counsels of the AMBALA-Mallari-Supervisory
Group, the AMBALA-Galang faction, and the FARM and its 27 members83 argue
their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the
Supervisory Group, represented by Suniga and Andaya; and the United Luisita
Workers Union, represented by Eldifonso Pingol, filed with the Court a joint
submission and motion for approval of a Compromise Agreement (English and
Tagalog versions) dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable
settlement, issued a Resolution84 creating a Mediation Panel composed of then
Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA
Justices Hector Hofileña and Teresita Dy-Liacco Flores, as members. Meetings on
five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were conducted.
Despite persevering and painstaking efforts on the part of the panel, mediation had
to be discontinued when no acceptable agreement could be reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY
PANGANDAMAN HAVE JURISDICTION, POWER AND/OR AUTHORITY TO
NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.
II.
[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER
AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN (16) YEARS FROM
THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION WITHOUT
VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE
CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE
PROCESS OF LAW AND THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND
OBLIGATIONS? MOREOVER, ARE THERE LEGAL GROUNDS UNDER THE CIVIL
CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x
ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED TO
NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE
SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND WHETHER THE
PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID
PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO
THE SDOA ARE NOW GOVERNED BY THE CORPORATION CODE (BATAS
PAMBANSA BLG. 68) AND NOT BY THE x x x [CARL] x x x.
On the other hand, RCBC submits the following issues:
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DID NOT
EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE CARP
DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED
VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS
AN INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE
OF COVERAGE DATED 02 JANUARY 2006 HAVE THE EFFECT OF
NULLIFYING TCT NOS. 391051 AND 391052 IN THE NAME OF
PETITIONER-INTERVENOR RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-
INTERVENOR RCBC CANNOT BE PREJUDICED BY A SUBSEQUENT
REVOCATION OR RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT AFFORDING
PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE PROCESS AS AN
INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain
portions of the converted property, and, hence, would ascribe on PARC the
commission of grave abuse of discretion when it included those portions in the
notice of coverage. And apart from raising issues identical with those of HLI, such as
but not limited to the absence of valid grounds to warrant the rescission and/or
revocation of the SDP, LIPCO would allege that the assailed resolution and the
notice of coverage were issued without affording it the right to due process as an
innocent purchaser for value. The government, LIPCO also argues, is estopped from
recovering properties which have since passed to innocent parties.
Simply formulated, the principal determinative issues tendered in the main petition
and to which all other related questions must yield boil down to the following: (1)
matters of standing; (2) the constitutionality of Sec. 31 of RA 6657; (3) the
jurisdiction of PARC to recall or revoke HLI’s SDP; (4) the validity or propriety of
such recall or revocatory action; and (5) corollary to (4), the validity of the terms
and conditions of the SDP, as embodied in the SDOA.
Our Ruling
I.
We first proceed to the examination of the preliminary issues before delving on the to rest any lingering doubt as to the status of protesters Galang, Suniga, and
more serious challenges bearing on the validity of PARC’s assailed issuance and the Andaya:
grounds for it.
Justice Bersamin: x x x I heard you a while ago that you were conceding the
Supervisory Group, AMBALA and their qualified farmer beneficiaries of Hacienda Luisita were real parties in interest?
respective leaders are real parties-in-interest
Atty. Asuncion: Yes, Your Honor please, real party in interest which that question
HLI would deny real party-in-interest status to the purported leaders of the refers to the complaints of protest initiated before the DAR and the real party in
Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene interest there be considered as possessed by the farmer beneficiaries who initiated
Galang, who filed the revocatory petitions before the DAR. As HLI would have it, the protest.91
Galang, the self-styled head of AMBALA, gained HLI employment in June 1990 and,
thus, could not have been a party to the SDOA executed a year earlier.85 As regards Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly
the Supervisory Group, HLI alleges that supervisors are not regular farmworkers, allowed to represent themselves, their fellow farmers or their organizations in any
but the company nonetheless considered them FWBs under the SDOA as a mere proceedings before the DAR. Specifically:
concession to enable them to enjoy the same benefits given qualified regular
farmworkers. However, if the SDOA would be canceled and land distribution SEC. 50. Quasi-Judicial Powers of the DAR.¾x x x
effected, so HLI claims, citing Fortich v. Corona,86 the supervisors would be excluded
from receiving lands as farmworkers other than the regular farmworkers who are
xxxx
merely entitled to the "fruits of the land."87
Responsible farmer leaders shall be allowed to represent themselves, their fellow
The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers
farmers or their organizations in any proceedings before the DAR: Provided,
who appear in the annual payroll, inclusive of the permanent and seasonal
however, that when there are two or more representatives for any individual or
employees, who are regularly or periodically employed by [HLI]."88 Galang, per HLI’s
group, the representatives should choose only one among themselves to represent
own admission, is employed by HLI, and is, thus, a qualified beneficiary of the SDP;
such party or group before any DAR proceedings. (Emphasis supplied.)
he comes within the definition of a real party-in-interest under Sec. 2, Rule 3 of the
Rules of Court, meaning, one who stands to be benefited or injured by the
Clearly, the respective leaders of the Supervisory Group and AMBALA are
judgment in the suit or is the party entitled to the avails of the suit.
contextually real parties-in-interest allowed by law to file a petition before the DAR
or PARC.
The same holds true with respect to the Supervisory Group whose members were
admittedly employed by HLI and whose names and signatures even appeared in the
This is not necessarily to say, however, that Galang represents AMBALA, for as
annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the other
records show and as HLI aptly noted,92 his "petisyon" filed with DAR did not carry
61 supervisors are certainly parties who would benefit or be prejudiced by the
the usual authorization of the individuals in whose behalf it was supposed to have
judgment recalling the SDP or replacing it with some other modality to comply with
been instituted. To date, such authorization document, which would logically
RA 6657.
include a list of the names of the authorizing FWBs, has yet to be submitted to be
part of the records.
Even assuming that members of the Supervisory Group are not regular
farmworkers, but are in the category of "other farmworkers" mentioned in Sec. 4,
PARC’s Authority to Revoke a Stock Distribution Plan
Article XIII of the Constitution,89 thus only entitled to a share of the fruits of the
land, as indeed Fortich teaches, this does not detract from the fact that they are still
identified as being among the "SDP qualified beneficiaries." As such, they are, thus, On the postulate that the subject jurisdiction is conferred by law, HLI maintains that
entitled to bring an action upon the SDP.90 At any rate, the following admission PARC is without authority to revoke an SDP, for neither RA 6657 nor EO 229
made by Atty. Gener Asuncion, counsel of HLI, during the oral arguments should put expressly vests PARC with such authority. While, as HLI argued, EO 229 empowers
PARC to approve the plan for stock distribution in appropriate cases, the
empowerment only includes the power to disapprove, but not to recall its previous
approval of the SDP after it has been implemented by the parties.93 To HLI, it is the
court which has jurisdiction and authority to order the revocation or rescission of
the PARC-approved SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the
plan for stock distribution of the corporate landowner belongs to PARC. However,
contrary to petitioner HLI’s posture, PARC also has the power to revoke the SDP
which it previously approved. It may be, as urged, that RA 6657 or other executive
issuances on agrarian reform do not explicitly vest the PARC with the power to
revoke/recall an approved SDP. Such power or authority, however, is deemed
possessed by PARC under the principle of necessary implication, a basic postulate
that what is implied in a statute is as much a part of it as that which is expressed. 94
We have explained that "every statute is understood, by implication, to contain all
such provisions as may be necessary to effectuate its object and purpose, or to
make effective rights, powers, privileges or jurisdiction which it grants, including all
such collateral and subsidiary consequences as may be fairly and logically inferred
from its terms."95 Further, "every statutory grant of power, right or privilege is
deemed to include all incidental power, right or privilege. 96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly
granted, the power to revoke it. By extension, the power to revoke is limited by the
authority to grant the license, from which it is derived in the first place. Thus, if the
FDA grants a license upon its finding that the applicant drug store has complied
with the requirements of the general laws and the implementing administrative
rules and regulations, it is only for their violation that the FDA may revoke the said
license. By the same token, having granted the permit upon his ascertainment that
the conditions thereof as applied x x x have been complied with, it is only for the
violation of such conditions that the mayor may revoke the said permit. 97 (Emphasis
supplied.)
Following the doctrine of necessary implication, it may be stated that the
conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to revoke or
recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power would
reduce it into a toothless agency of CARP, because the very same agency tasked to
ensure compliance by the corporate landowner with the approved SDP would be
without authority to impose sanctions for non-compliance with it.98 With the view
We take of the case, only PARC can effect such revocation. The DAR Secretary, by
his own authority as such, cannot plausibly do so, as the acceptance and/or
approval of the SDP sought to be taken back or undone is the act of PARC whose
official composition includes, no less, the President as chair, the DAR Secretary as
vice-chair, and at least eleven (11) other department heads. 99
On another but related issue, the HLI foists on the Court the argument that
subjecting its landholdings to compulsory distribution after its approved SDP has
been implemented would impair the contractual obligations created under the
SDOA.
The broad sweep of HLI’s argument ignores certain established legal precepts and
must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations
between or among parties is deemed read into the contract and its implementation
cannot successfully be resisted by force of the non-impairment guarantee. There is,
in that instance, no impingement of the impairment clause, the non-impairment
protection being applicable only to laws that derogate prior acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties.
Impairment, in fine, obtains if a subsequent law changes the terms of a contract
between the parties, imposes new conditions, dispenses with those agreed upon or
withdraws existing remedies for the enforcement of the rights of the
parties.100 Necessarily, the constitutional proscription would not apply to laws
already in effect at the time of contract execution, as in the case of RA 6657, in
relation to DAO 10, vis-à-vis HLI’s SDOA. As held in Serrano v. Gallant Maritime
Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned with
the general principle that laws newly enacted have only a prospective operation,
and cannot affect acts or contracts already perfected; however, as to laws already
in existence, their provisions are read into contracts and deemed a part thereof.
Thus, the non-impairment clause under Section 10, Article II [of the Constitution] is
limited in application to laws about to be enacted that would in any way derogate
from existing acts or contracts by enlarging, abridging or in any manner changing
the intention of the parties thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of
issuance within the ambit of Sec. 10, Art. III of the Constitution providing that "[n]o
law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a
breach of its terms and conditions is not a PARC administrative matter, but one that
gives rise to a cause of action cognizable by regular courts.102 This contention has
little to commend itself. The SDOA is a special contract imbued with public interest,
entered into and crafted pursuant to the provisions of RA 6657. It embodies the
SDP, which requires for its validity, or at least its enforceability, PARC’s approval.
And the fact that the certificate of compliance103––to be issued by agrarian
authorities upon completion of the distribution of stocks––is revocable by the same
issuing authority supports the idea that everything about the implementation of the
SDP is, at the first instance, subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations
and remedies. The Code, it adds, should be the applicable law on the disposition of
the agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to
the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply with RA
6657, which the OSG aptly described as the "mother law" of the SDOA and the
SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by
invoking exclusive applicability of the Corporation Code under the guise of being a
corporate entity.
Without in any way minimizing the relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its applicability is limited as the rights of the
parties arising from the SDP should not be made to supplant or circumvent the
agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other hand,
RA 6657 is the special law on agrarian reform. As between a general and special
law, the latter shall prevail—generalia specialibus non derogant.105 Besides, the
present impasse between HLI and the private respondents is not an intra-corporate
dispute which necessitates the application of the Corporation Code. What private
respondents questioned before the DAR is the proper implementation of the SDP
and HLI’s compliance with RA 6657. Evidently, RA 6657 should be the applicable law
to the instant case.
HLI further contends that the inclusion of the agricultural land of Hacienda Luisita
under the coverage of CARP and the eventual distribution of the land to the FWBs
would amount to a disposition of all or practically all of the corporate assets of HLI.
HLI would add that this contingency, if ever it comes to pass, requires the
applicability of the Corporation Code provisions on corporate dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would
apply insofar as the winding up of HLI’s affairs or liquidation of the assets is
concerned. However, the mere inclusion of the agricultural land of Hacienda Luisita
under the coverage of CARP and the land’s eventual distribution to the FWBs will
not, without more, automatically trigger the dissolution of HLI. As stated in the
SDOA itself, the percentage of the value of the agricultural land of Hacienda Luisita
in relation to the total assets transferred and conveyed by Tadeco to HLI comprises
only 33.296%, following this equation: value of the agricultural lands divided by
total corporate assets. By no stretch of imagination would said percentage amount
to a disposition of all or practically all of HLI’s corporate assets should compulsory
land acquisition and distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP sixteen
(16) years after its execution pursuant to Sec. 31 of RA 6657 for the reasons set
forth in the Terminal Report of the Special Task Force, as endorsed by PARC Excom.
But first, the matter of the constitutionality of said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the
corporation, as a mode of CARP compliance, to resort to stock distribution, an
arrangement which, to FARM, impairs the fundamental right of farmers and
farmworkers under Sec. 4, Art. XIII of the Constitution.106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits
stock transfer in lieu of outright agricultural land transfer; in fine, there is stock
certificate ownership of the farmers or farmworkers instead of them owning the
land, as envisaged in the Constitution. For FARM, this modality of distribution is an
anomaly to be annulled for being inconsistent with the basic concept of agrarian
reform ingrained in Sec. 4, Art. XIII of the Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land
ownership to farmers and other qualified beneficiaries. It draws attention in this
regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian
reform." The constitutionality of a law, HLI added, cannot, as here, be attacked
collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily
its counterpart provision in EO 229 must fail as explained below.
When the Court is called upon to exercise its power of judicial review over, and pass
upon the constitutionality of, acts of the executive or legislative departments, it
does so only when the following essential requirements are first met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible
opportunity by a proper party or one with locus standi; and
(3) the issue of constitutionality must be the very lis mota of the case. 108
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM, composed of
a small minority of 27 farmers, has yet to explain its failure to challenge the
constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when
PARC approved the SDP of Hacienda Luisita or at least within a reasonable time
thereafter and why its members received benefits from the SDP without so much of
a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via
PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and
approving resolution were sought to be revoked, but not, to stress, by FARM or any
of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did
NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the
purported flaws and gaps in the subsequent implementation of the SDP. Even the
public respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27 members
formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3,
2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM
some eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM
members slept on their rights and even accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits
were derived. The Court cannot now be goaded into resolving a constitutional issue
that FARM failed to assail after the lapse of a long period of time and the
occurrence of numerous events and activities which resulted from the application
of an alleged unconstitutional legal provision.
It has been emphasized in a number of cases that the question of constitutionality
will not be passed upon by the Court unless it is properly raised and presented in an
appropriate case at the first opportunity.109 FARM is, therefore, remiss in belatedly
questioning the constitutionality of Sec. 31 of RA 6657. The second requirement
that the constitutional question should be raised at the earliest possible
opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be the
very lis mota of the case does not likewise obtain. The lis mota aspect is not
present, the constitutional issue tendered not being critical to the resolution of the
case. The unyielding rule has been to avoid, whenever plausible, an issue assailing
the constitutionality of a statute or governmental act.110 If some other grounds exist
by which judgment can be made without touching the constitutionality of a law,
such recourse is favored.111 Garcia v. Executive Secretary explains why:
Lis Mota — the fourth requirement to satisfy before this Court will undertake
judicial review — means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed of on
some other ground, such as the application of the statute or the general law. The
petitioner must be able to show that the case cannot be legally resolved unless the
constitutional question raised is determined. This requirement is based on the rule
that every law has in its favor the presumption of constitutionality; to justify its
nullification, there must be a clear and unequivocal breach of the Constitution, and
not one that is doubtful, speculative, or argumentative. 112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken by
AMBALA (to which the FARM members previously belonged) and the Supervisory
Group, is the alleged non-compliance by HLI with the conditions of the SDP to
support a plea for its revocation. And before the Court, the lis mota is whether or
not PARC acted in grave abuse of discretion when it ordered the recall of the SDP
for such non-compliance and the fact that the SDP, as couched and implemented,
offends certain constitutional and statutory provisions. To be sure, any of these key
issues may be resolved without plunging into the constitutionality of Sec. 31 of RA
6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is
not the said section per se that is invalid, but rather it is the alleged application of
the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700,113 amending Sec. 7 of
RA 6657, has all but superseded Sec. 31 of RA 6657 vis-à-vis the stock distribution
component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat
after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to
sell and compulsory acquisition." Thus, for all intents and purposes, the stock
distribution scheme under Sec. 31 of RA 6657 is no longer an available option under
existing law. The question of whether or not it is unconstitutional should be a moot
issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional
issues otherwise already moot and academic114 provided the following requisites
are present:
x x x first, there is a grave violation of the Constitution; second, the exceptional
character of the situation and the paramount public interest is involved; third, when
the constitutional issue raised requires formulation of controlling principles to guide
the bench, the bar, and the public; fourth, the case is capable of repetition yet
evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of
the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the right
of the farmers and regular farmworkers, who are landless, to OWN directly or
COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive
a just share of the fruits thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into account
ecological, developmental, or equity considerations, and subject to the payment of
just compensation. In determining retention limits, the State shall respect the right
of small landowners. The State shall further provide incentives for voluntary land-
sharing. (Emphasis supplied.)
The wording of the provision is unequivocal––the farmers and regular farmworkers
have a right TO OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic
law allows two (2) modes of land distribution—direct and indirect ownership. Direct
transfer to individual farmers is the most commonly used method by DAR and
widely accepted. Indirect transfer through collective ownership of the agricultural
land is the alternative to direct ownership of agricultural land by individual farmers.
The aforequoted Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No
language can be found in the 1987 Constitution that disqualifies or prohibits
corporations or cooperatives of farmers from being the legal entity through which
collective ownership can be exercised. The word "collective" is defined as
"indicating a number of persons or things considered as constituting one group or
aggregate,"115 while "collectively" is defined as "in a collective sense or manner; in a
mass or body."116 By using the word "collectively," the Constitution allows for
indirect ownership of land and not just outright agricultural land transfer. This is in
recognition of the fact that land reform may become successful even if it is done
through the medium of juridical entities composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows
workers’ cooperatives or associations to collectively own the land, while the second
paragraph of Sec. 31 allows corporations or associations to own agricultural land
with the farmers becoming stockholders or members. Said provisions read:
SEC. 29. Farms owned or operated by corporations or other business
associations.—In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be
owned collectively by the worker beneficiaries who shall form a workers’
cooperative or association which will deal with the corporation or business
association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners.— x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may give their
qualified beneficiaries the right to purchase such proportion of the capital stock of
the corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the company’s total assets, under such terms and conditions as
may be agreed upon by them. In no case shall the compensation received by the
workers at the time the shares of stocks are distributed be reduced. The same
principle shall be applied to associations, with respect to their equity or
participation. x x x (Emphasis supplied.)
Clearly, workers’ cooperatives or associations under Sec. 29 of RA 6657 and
corporations or associations under the succeeding Sec. 31, as differentiated from
individual farmers, are authorized vehicles for the collective ownership of
agricultural land. Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality of their own, while
corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is
constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that land
can be owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution
are in unison with respect to the two (2) modes of ownership of agricultural lands
tilled by farmers––DIRECT and COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the
principle of direct ownership by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership,
stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’
cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers’
cooperatives, do the farmers own specific areas of land where they only unite in
their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems involved: the
"moshave" type of agriculture and the "kibbutz." So are both contemplated in the
report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na
reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na
pagmamay-ari – directly – at ang tinatawag na sama-samang gagawin ng mga
magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila itong
"cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly or collectively the
lands they till," is this land for the tillers rather than land for the landless? Before,
we used to hear "land for the landless," but now the slogan is "land for the tillers."
Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig
sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung saan
inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin naman ng
"collectively" ay sama-samang paggawa sa isang lupain o isang bukid, katulad ng
sitwasyon sa Negros.117 (Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural land
"sama-sama" or collectively. Thus, the main requisite for collective ownership of
land is collective or group work by farmers of the agricultural land. Irrespective of
whether the landowner is a cooperative, association or corporation composed of
farmers, as long as concerted group work by the farmers on the land is present,
then it falls within the ambit of collective ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on
the part of the State to pursue, by law, an agrarian reform program founded on the
policy of land for the landless, but subject to such priorities as Congress may
prescribe, taking into account such abstract variable as "equity considerations." The
textual reference to a law and Congress necessarily implies that the above
constitutional provision is not self-executoryand that legislation is needed to
implement the urgently needed program of agrarian reform. And RA 6657 has been
enacted precisely pursuant to and as a mechanism to carry out the constitutional
directives. This piece of legislation, in fact, restates118 the agrarian reform policy
established in the aforementioned provision of the Constitution of promoting the
welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian
reform" as "the redistribution of lands … to farmers and regular farmworkers who
are landless … to lift the economic status of the beneficiaries and all other
arrangements alternative to the physical redistribution of lands, such as
production or profit sharing, labor administration and the distribution of shares of
stock which will allow beneficiaries to receive a just share of the fruits of the lands
they work."
With the view We take of this case, the stock distribution option devised under Sec.
31 of RA 6657 hews with the agrarian reform policy, as instrument of social justice
under Sec. 4 of Article XIII of the Constitution. Albeit land ownership for the landless
appears to be the dominant theme of that policy, We emphasize that Sec. 4, Article
XIII of the Constitution, as couched, does not constrict Congress to passing an
agrarian reform law planted on direct land transfer to and ownership by farmers
and no other, or else the enactment suffers from the vice of unconstitutionality. If
the intention were otherwise, the framers of the Constitution would have worded
said section in a manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is
not inconsistent with the State’s commitment to farmers and farmworkers to
advance their interests under the policy of social justice. The legislature, thru Sec.
31 of RA 6657, has chosen a modality for collective ownership by which the
imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.
FARM contends that the farmers in the stock distribution scheme under Sec. 31 do
not own the agricultural land but are merely given stock certificates. Thus, the
farmers lose control over the land to the board of directors and executive officials
of the corporation who actually manage the land. They conclude that such
arrangement runs counter to the mandate of the Constitution that any agrarian
reform must preserve the control over the land in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly own
the land, still, the Corporation Code is clear that the FWB becomes a stockholder
who acquires an equitable interest in the assets of the corporation, which include
the agricultural lands. It was explained that the "equitable interest of the
shareholder in the property of the corporation is represented by the term stock,
and the extent of his interest is described by the term shares. The expression shares
of stock when qualified by words indicating number and ownership expresses the
extent of the owner’s interest in the corporate property."119 A share of stock
typifies an aliquot part of the corporation’s property, or the right to share in its
proceeds to that extent when distributed according to law and equity and that its
holder is not the owner of any part of the capital of the corporation. 120 However,
the FWBs will ultimately own the agricultural lands owned by the corporation when
the corporation is eventually dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land operated
and managed by the corporation, a reading of the second paragraph of Sec. 31
shows otherwise. Said provision provides that qualified beneficiaries have "the right
to purchase such proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the
company’s total assets." The wording of the formula in the computation of the
number of shares that can be bought by the farmers does not mean loss of control
on the part of the farmers. It must be remembered that the determination of the
percentage of the capital stock that can be bought by the farmers depends on the
value of the agricultural land and the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The
policy on agrarian reform is that control over the agricultural land must always be in
the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it
the farmers should always own majority of the common shares entitled to elect the
members of the board of directors to ensure that the farmers will have a clear
majority in the board. Before the SDP is approved, strict scrutiny of the proposed
SDP must always be undertaken by the DAR and PARC, such that the value of the
agricultural land contributed to the corporation must always be more than 50% of
the total assets of the corporation to ensure that the majority of the members of
the board of directors are composed of the farmers. The PARC composed of the
President of the Philippines and cabinet secretaries must see to it that control over
the board of directors rests with the farmers by rejecting the inclusion of non-
agricultural assets which will yield the majority in the board of directors to non-
farmers. Any deviation, however, by PARC or DAR from the correct application of
the formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not
make said provision constitutionally infirm. Rather, it is the application of said
provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the
constitutional policy of ensuring control by the farmers.
A view has been advanced that there can be no agrarian reform unless there is land
distribution and that actual land distribution is the essential characteristic of a
constitutional agrarian reform program. On the contrary, there have been so many
instances where, despite actual land distribution, the implementation of agrarian
reform was still unsuccessful. As a matter of fact, this Court may take judicial notice
of cases where FWBs sold the awarded land even to non-qualified persons and in
violation of the prohibition period provided under the law. This only proves to show
that the mere fact that there is land distribution does not guarantee a successful
implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old pastoral model of land
ownership where non-human juridical persons, such as corporations, were
prohibited from owning agricultural lands are no longer realistic under existing
conditions. Practically, an individual farmer will often face greater disadvantages
and difficulties than those who exercise ownership in a collective manner through a
cooperative or corporation. The former is too often left to his own devices when
faced with failing crops and bad weather, or compelled to obtain usurious loans in
order to purchase costly fertilizers or farming equipment. The experiences learned
from failed land reform activities in various parts of the country are lack of
financing, lack of farm equipment, lack of fertilizers, lack of guaranteed buyers of
produce, lack of farm-to-market roads, among others. Thus, at the end of the day,
there is still no successful implementation of agrarian reform to speak of in such a
case.
Although success is not guaranteed, a cooperative or a corporation stands in a
better position to secure funding and competently maintain the agri-business than
the individual farmer. While direct singular ownership over farmland does offer
advantages, such as the ability to make quick decisions unhampered by interference
from others, yet at best, these advantages only but offset the disadvantages that
are often associated with such ownership arrangement. Thus, government must be
flexible and creative in its mode of implementation to better its chances of success.
One such option is collective ownership through juridical persons composed of
farmers.
Aside from the fact that there appears to be no violation of the Constitution, the
requirement that the instant case be capable of repetition yet evading review is
also wanting. It would be speculative for this Court to assume that the legislature
will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the
exercise by Congress of its official functions, the heavy presumption being that a
law is the product of earnest studies by Congress to ensure that no constitutional
prescription or concept is infringed.121 Corollarily, courts will not pass upon
questions of wisdom, expediency and justice of legislation or its provisions. Towards
this end, all reasonable doubts should be resolved in favor of the constitutionality
of a law and the validity of the acts and processes taken pursuant thereof. 122
Consequently, before a statute or its provisions duly challenged are voided, an
unequivocal breach of, or a clear conflict with the Constitution, not merely a
doubtful or argumentative one, must be demonstrated in such a manner as to leave
no doubt in the mind of the Court. In other words, the grounds for nullity must be
beyond reasonable doubt.123 FARM has not presented compelling arguments to
overcome the presumption of constitutionality of Sec. 31 of RA 6657.
The wisdom of Congress in allowing an SDP through a corporation as an alternative
mode of implementing agrarian reform is not for judicial determination. Established
jurisprudence tells us that it is not within the province of the Court to inquire into
the wisdom of the law, for, indeed, We are bound by words of the statute.124
II.
The stage is now set for the determination of the propriety under the premises of
the revocation or recall of HLI’s SDP. Or to be more precise, the inquiry should be:
whether or not PARC gravely abused its discretion in revoking or recalling the
subject SDP and placing the hacienda under CARP’s compulsory acquisition and
distribution scheme.
The findings, analysis and recommendation of the DAR’s Special Task Force
contained and summarized in its Terminal Report provided the bases for the
assailed PARC revocatory/recalling Resolution. The findings may be grouped into
two: (1) the SDP is contrary to either the policy on agrarian reform, Sec. 31 of RA
6657, or DAO 10; and (2) the alleged violation by HLI of the conditions/terms of the
SDP. In more particular terms, the following are essentially the reasons
underpinning PARC’s revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLI’s SDP, the lives of
the FWBs have hardly improved and the promised increased income has
not materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours
worked––or the so-called "man days"––is grossly onerous to the FWBs, as
HLI, in the guise of rotation, can unilaterally deny work to anyone. In
elaboration of this ground, PARC’s Resolution No. 2006-34-01, denying
HLI’s motion for reconsideration of Resolution No. 2005-32-01, stated that
the man days criterion worked to dilute the entitlement of the original
share beneficiaries;125
(4) The distribution/transfer of shares was not in accordance with the
timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross
sales every year as production-sharing benefit on top of the workers’
salary; and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its obligations
under the SDP, as approved by PARC itself, and tags the reasons given for the
revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests on
solid grounds set forth in the Terminal Report, a position shared by AMBALA, which,
in some pleadings, is represented by the same counsel as that appearing for the
Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of the
SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10. And training
its sight on the resulting dilution of the equity of the FWBs appearing in HLI’s
masterlist, FARM would state that the SDP, as couched and implemented, spawned
disparity when there should be none; parity when there should have been
differentiation.126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance
the dignity and improve the quality of lives of the FWBs through greater
productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.¾It is the policy of the State to
pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the
landless farmers and farm workers will receive the highest consideration to
promote social justice and to move the nation towards sound rural development
and industrialization, and the establishment of owner cultivatorship of economic-
sized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due regard
to the rights of landowners to just compensation and to the ecological needs of the
nation, shall be undertaken to provide farmers and farm workers with the
opportunity to enhance their dignity and improve the quality of their lives through
greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the fruits thereof. To this end, the
State shall encourage the just distribution of all agricultural lands, subject to the
priorities and retention limits set forth in this Act, having taken into account
ecological, developmental, and equity considerations, and subject to the payment
of just compensation. The State shall respect the right of small landowners and shall
provide incentives for voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more
equitable distribution and ownership of land x x x shall be undertaken to provide
farmers and farm workers with the opportunity to enhance their dignity and
improve the quality of their lives through greater productivity of agricultural lands."
Of note is the term "opportunity" which is defined as a favorable chance or opening
offered by circumstances.127 Considering this, by no stretch of imagination can said
provision be construed as a guarantee in improving the lives of the FWBs. At best, it
merely provides for a possibility or favorable chance of uplifting the economic
status of the FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the legal
obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO
10, a violation of which would justify discarding the stock distribution option.
Nothing in that option agreement, law or department order indicates otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during the
regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and
higher benefits exclusive of free hospital and medical benefits to their immediate
family. And attached as Annex "G" to HLI’s Memorandum is the certified true report
of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations,
captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in
Thousand Pesos) Since the Stock Option was Approved by PARC/CARP," detailing
what HLI gave their workers from 1989 to 2005. The sum total, as added up by the
Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash
Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) =
PhP 303,040. The cash out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3% of the gross produce of the
hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale
of the 500-hectare converted lands. While not included in the report, HLI manifests
having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land
traversed by the SCTEX.128 On top of these, it is worth remembering that the shares
of stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited
from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has
not anyway earned profits through the years, it cannot be over-emphasized that, as
a matter of common business sense, no corporation could guarantee a profitable
run all the time. As has been suggested, one of the key features of an SDP of a
corporate landowner is the likelihood of the corporate vehicle not earning, or,
worse still, losing money.129
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood that
the plan "would result in increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to them
individually."130 But as aptly noted during the oral arguments, DAO 10 ought to have
not, as it cannot, actually exact assurance of success on something that is subject to
the will of man, the forces of nature or the inherent risky nature of business. 131 Just
like in actual land distribution, an SDP cannot guarantee, as indeed the SDOA does
not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of
the fact that there were many instances wherein after a farmworker beneficiary has
been awarded with an agricultural land, he just subsequently sells it and is
eventually left with nothing in the end.
In all then, the onerous condition of the FWBs’ economic status, their life of
hardship, if that really be the case, can hardly be attributed to HLI and its SDP and
provide a valid ground for the plan’s revocation.
Neither does HLI’s SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec.
31 of RA 6657, albeit public respondents erroneously submit otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without relevance
to the issue on the propriety of the assailed order revoking HLI’s SDP, for the
paragraph deals with the transfer of agricultural lands to the government, as a
mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer
ownership over their agricultural landholdings to the Republic of the Philippines
pursuant to Section 20 hereof or to qualified beneficiaries under such terms and
conditions, consistent with this Act, as they may agree, subject to confirmation by
the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as
follows:
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the capital
stock of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the company’s total assets, under such terms and
conditions as may be agreed upon by them. In no case shall the compensation
received by the workers at the time the shares of stocks are distributed be reduced.
xxx
Corporations or associations which voluntarily divest a proportion of their capital
stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or executive
committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the
same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be
void ab initio unless said transaction is in favor of a qualified and registered
beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be
distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of RA
6657 refers to as that "proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the
company’s total assets" had been observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of
RA 6657. The stipulation reads:
1. The percentage of the value of the agricultural land of Hacienda Luisita
(P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and
conveyed to the SECOND PARTY is 33.296% that, under the law, is the proportion of
the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or
355,531,462 shares with a par value of P1.00 per share, that has to be distributed to
the THIRD PARTY under the stock distribution plan, the said 33.296% thereof
being P118,391,976.85 or 118,391,976.85 shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLI’s other
assets is PhP 393,924,220. The total value of HLI’s assets is, therefore, PhP
590,554,220.132 The percentage of the value of the agricultural lands (PhP
196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%, which
represents the stockholdings of the 6,296 original qualified farmworker-
beneficiaries (FWBs) in HLI. The total number of shares to be distributed to said
qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting 33.296%
of the 355,531,462 shares which is the outstanding capital stock of HLI with a value
of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296
FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares under the
SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the 6,296
FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall
be assured of at least one (1) representative in the board of directors or in a
management or executive committee irrespective of the value of the equity of the
FWBs in HLI, the Court finds that the SDOA contained provisions making certain the
FWBs’ representation in HLI’s governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will have
been acquired from the FIRST PARTY and distributed to the THIRD PARTY, FIRST
PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid
and effective for one (1) year, in favor of the farmworkers appearing as
shareholders of the SECOND PARTY at the start of said year which will empower the
THIRD PARTY or their representative to vote in stockholders’ and board of directors’
meetings of the SECOND PARTY convened during the year the entire 33.296% of the
outstanding capital stock of the SECOND PARTY earmarked for distribution and thus
be able to gain such number of seats in the board of directors of the SECOND PARTY
that the whole 33.296% of the shares subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting the inspection of its
books by accountants chosen by the FWBs; hence, the assumption may be made
that there has been no violation of the statutory prescription under sub-paragraph
(a) on the auditing of HLI’s accounts.
Public respondents, however, submit that the distribution of the mandatory
minimum ratio of land-to-shares of stock, referring to the 118,391,976.85 shares
with par value of PhP 1 each, should have been made in full within two (2) years
from the approval of RA 6657, in line with the last paragraph of Sec. 31 of said
law.133
Public respondents’ submission is palpably erroneous. We have closely examined
the last paragraph alluded to, with particular focus on the two-year period
mentioned, and nothing in it remotely supports the public respondents’ posture. In
its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or stock
transfer envisioned above is not made or realized or the plan for such stock
distribution approved by the PARC within the same period, the agricultural land of
the corporate owners or corporation shall be subject to the compulsory coverage of
this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within which
the corporate landowner, to avoid land transfer as a mode of CARP coverage under
RA 6657, is to avail of the stock distribution option or to have the SDP approved.
The HLI secured approval of its SDP in November 1989, well within the two-year
period reckoned from June 1988 when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA
6657 as well as the statutory issues, We shall now delve into what PARC and
respondents deem to be other instances of violation of DAO 10 and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita
unfragmented is also not among the imperative impositions by the SDP, RA 6657,
and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989
to the PARC effectively assured the intended stock beneficiaries that the physical
integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and
the PARC-assailed resolution would take HLI to task for securing approval of the
conversion to non-agricultural uses of 500 hectares of the hacienda. In not too
many words, the Report and the resolution view the conversion as an infringement
of Sec. 5(a) of DAO 10 which reads: "a. that the continued operation of the
corporation with its agricultural land intact and unfragmented is viable with
potential for growth and increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)––just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiaries––is but one of the
stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said
Sec. 5(a) does not exact from the corporate landowner-applicant the undertaking to
keep the farm intact and unfragmented ad infinitum. And there is logic to HLI’s
stated observation that the key phrase in the provision of Sec. 5(a) is "viability of
corporate operations": "[w]hat is thus required is not the agricultural land
remaining intact x x x but the viability of the corporate operations with its
agricultural land being intact and unfragmented. Corporate operation may be viable
even if the corporate agricultural land does not remain intact or
[un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as not
violative of any issuance, let alone undermining the viability of Hacienda Luisita’s
operation, as the DAR Secretary approved the land conversion applied for and its
disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of
RA 6657 which reads:
Sec. 65. Conversion of Lands.¾After the lapse of five years from its award when the
land ceases to be economically feasible and sound for agricultural purposes, or the
locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR upon application of the
beneficiary or landowner with due notice to the affected parties, and subject to
existing laws, may authorize the x x x conversion of the land and its dispositions. x x
x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the
gross production sales of the hacienda and pay dividends from profit, the entries in
its financial books tend to indicate compliance by HLI of the profit-sharing
equivalent to 3% of the gross sales from the production of the agricultural land on
top of (a) the salaries and wages due FWBs as employees of the company and (b)
the 3% of the gross selling price of the converted land and that portion used for the
SCTEX. A plausible evidence of compliance or non-compliance, as the case may be,
could be the books of account of HLI. Evidently, the cry of some groups of not
having received their share from the gross production sales has not adequately
been validated on the ground by the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when supported
by substantial evidence and are accorded due respect and weight, especially when
they are affirmed by the CA.135 However, such rule is not absolute. One such
exception is when the findings of an administrative agency are conclusions without
citation of specific evidence on which they are based,136 such as in this particular
instance. As culled from its Terminal Report, it would appear that the Special Task
Force rejected HLI’s claim of compliance on the basis of this ratiocination:
 The Task Force position: Though, allegedly, the Supervisory Group receives
the 3% gross production share and that others alleged that they received
30 million pesos still others maintain that they have not received anything
yet. Item No. 4 of the MOA is clear and must be followed. There is a
distinction between the total gross sales from the production of the land
and the proceeds from the sale of the land. The former refers to the
fruits/yield of the agricultural land while the latter is the land itself. The
phrase "the beneficiaries are entitled every year to an amount
approximately equivalent to 3% would only be feasible if the subject is the
produce since there is at least one harvest per year, while such is not the
case in the sale of the agricultural land. This negates then the claim of HLI
that, all that the FWBs can be entitled to, if any, is only 3% of the purchase
price of the converted land.
 Besides, the Conversion Order dated 14 August 1996 provides that "the
benefits, wages and the like, presently received by the FWBs shall not in
any way be reduced or adversely affected. Three percent of the gross
selling price of the sale of the converted land shall be awarded to the
beneficiaries of the SDO." The 3% gross production share then is different
from the 3% proceeds of the sale of the converted land and, with more
reason, the 33% share being claimed by the FWBs as part owners of the
Hacienda, should have been given the FWBs, as stockholders, and to which
they could have been entitled if only the land were acquired and
redistributed to them under the CARP.
xxxx
 The FWBs do not receive any other benefits under the MOA except the
aforementioned [(viz: shares of stocks (partial), 3% gross production sale
(not all) and homelots (not all)].
Judging from the above statements, the Special Task Force is at best silent on
whether HLI has failed to comply with the 3% production-sharing obligation or the
3% of the gross selling price of the converted land and the SCTEX lot. In fact, it
admits that the FWBs, though not all, have received their share of the gross
production sales and in the sale of the lot to SCTEX. At most, then, HLI had complied
substantially with this SDP undertaking and the conversion order. To be sure, this
slight breach would not justify the setting to naught by PARC of the approval action
of the earlier PARC. Even in contract law, rescission, predicated on violation of
reciprocity, will not be permitted for a slight or casual breach of contract; rescission
may be had only for such breaches that are substantial and fundamental as to
defeat the object of the parties in making the agreement. 137
Despite the foregoing findings, the revocation of the approval of the SDP is not
without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or
business associations owning or operating farms which opted for land distribution.
Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.¾The individual
members of the cooperatives or corporations mentioned in the preceding section
shall be provided with homelots and small farmlots for their family use, to be taken
from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.¾In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be
owned collectively by the worker-beneficiaries who shall form a workers’
cooperative or association which will deal with the corporation or business
association. Until a new agreement is entered into by and between the workers’
cooperative or association and the corporation or business association, any
agreement existing at the time this Act takes effect between the former and the
previous landowner shall be respected by both the workers’ cooperative or
association and the corporation or business association.
Noticeably, the foregoing provisions do not make reference to corporations which
opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said
corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without
charge among the qualified family-beneficiaries x x x residential or homelots of not
more than 240 sq. m. each, with each family beneficiary being assured of receiving
and owning a homelot in the barrio or barangay where it actually resides," "within a
reasonable time."
More than sixteen (16) years have elapsed from the time the SDP was approved by
PARC, and yet, it is still the contention of the FWBs that not all was given the 240-
square meter homelots and, of those who were already given, some still do not
have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the
qualified family beneficiaries were not given the 240 square meters each. So, can
you also [prove] that the qualified family beneficiaries were already provided the
240 square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing that
all the qualified beneficiaries have received homelots was submitted by HLI. Hence,
this Court is constrained to rule that HLI has not yet fully complied with its
undertaking to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of
stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of
the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI]
shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the
THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them
of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND
PARTY that are presently owned and held by the FIRST PARTY, until such time as the
entire block of 118,391,976.85 shares shall have been completely acquired and
distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the
FWBs, albeit not entailing a cash out from them, is contingent on the number of
"man days," that is, the number of days that the FWBs have worked during the
year. This formula deviates from Sec. 1 of DAO 10, which decrees the distribution of
equal number of shares to the FWBs as the minimum ratio of shares of stock for
purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.¾The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of
shares of the same class and value, with the same rights and features as all other
shares, to each of the qualified beneficiaries. This distribution plan in all cases, shall
be at least the minimum ratio for purposes of compliance with Section 31 of R.A.
No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority, salary,
position and other circumstances which may be deemed desirable as a matter of
sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to
be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum
ratio contemplates of that "proportion of the capital stock of the corporation that
the agricultural land, actually devoted to agricultural activities, bears in relation to
the company’s total assets."139 It is this set of shares of stock which, in line with Sec.
4 of DAO 10, is supposed to be allocated "for the distribution of an equal number of
shares of stock of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a gratuitous
extra grant, meaning that this set or category constitutes an augmentation share/s
that the corporate landowner may give under an additional stock distribution
scheme, taking into account such variables as rank, seniority, salary, position and
like factors which the management, in the exercise of its sound discretion, may
deem desirable.140
Before anything else, it should be stressed that, at the time PARC approved HLI’s
SDP, HLI recognized 6,296individuals as qualified FWBs. And under the 30-year
stock distribution program envisaged under the plan, FWBs who came in after 1989,
new FWBs in fine, may be accommodated, as they appear to have in fact been
accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall
depend on the number of "man days," HLI violated the afore-quoted rule on stock
distribution and effectively deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had
given up their rights to the land that could have been distributed to them, suffered
a dilution of their due share entitlement. As has been observed during the oral
arguments, HLI has chosen to use the shares earmarked for farmworkers as reward
system chips to water down the shares of the original 6,296 FWBs. 141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: That’s the only point I want to know x x x. Now, but they chose to
enter SDOA instead of placing the land under CARP. And for that reason those who
would have gotten their shares of the land actually gave up their rights to this land
in place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the
land because that way the government takes own [sic] the land and distribute it to
the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to
the farmers at that time that numbered x x x those who signed five thousand four
hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in
from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional
shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to
them in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring… (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up?
None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original…
(interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be
diluted, because the company has chosen to use the shares as reward system for
new workers who come in? It is not that the new workers, in effect, become just
workers of the corporation whose stockholders were already fixed. The TADECO
who has shares there about sixty six percent (66%) and the five thousand four
hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why,
why will you x x x what right or where did you get that right to use this shares, to
water down the shares of those who should have been benefited, and to use it as a
reward system decided by the company?142
From the above discourse, it is clear as day that the original 6,296 FWBs, who were
qualified beneficiaries at the time of the approval of the SDP, suffered from
watering down of shares. As determined earlier, each original FWB is entitled to
18,804.32 HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI
shares per beneficiary, because the acquisition and distribution of the HLI shares
were based on "man days" or "number of days worked" by the FWB in a year’s
time. As explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal
year before he or she becomes entitled to HLI shares. If it falls below 37 days, the
FWB, unfortunately, does not get any share at year end. The number of HLI shares
distributed varies depending on the number of days the FWBs were allowed to
work in one year. Worse, HLI hired farmworkers in addition to the original 6,296
FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by said section provides a justifying dimension to its 30-year stock distribution
HLI to the Court, the total number of farmworkers of HLI as of said date stood at program.
10,502. All these farmworkers, which include the original 6,296 FWBs, were given
shares out of the 118,931,976.85 HLI shares representing the 33.296% of the total HLI’s reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as
outstanding capital stock of HLI. Clearly, the minimum individual allocation of each the said provision clearly deals with land distribution.
original FWB of 18,804.32 shares was diluted as a result of the use of "man days"
and the hiring of additional farmworkers. SEC. 26. Payment by Beneficiaries.¾Lands awarded pursuant to this Act shall be
paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.
Going into another but related matter, par. 3 of the SDOA expressly providing for a
30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to Then, too, the ones obliged to pay the LBP under the said provision are the
what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of beneficiaries. On the other hand, in the instant case, aside from the fact that what
the approved stock distribution plan within three (3) months from receipt by the is involved is stock distribution, it is the corporate landowner who has the
corporate landowner of the approval of the plan by PARC. In fact, based on the said obligation to distribute the shares of stock among the FWBs.
provision, the transfer of the shares of stock in the names of the qualified FWBs
should be recorded in the stock and transfer books and must be submitted to the
Evidently, the land transfer beneficiaries are given thirty (30) years within which to
SEC within sixty (60) days from implementation. As stated:
pay the cost of the land thus awarded them to make it less cumbersome for them
to pay the government. To be sure, the reason underpinning the 30-year
Section 11. Implementation/Monitoring of Plan.¾The approved stock distribution accommodation does not apply to corporate landowners in distributing shares of
plan shall be implemented within three (3) months from receipt by the corporate stock to the qualified beneficiaries, as the shares may be issued in a much shorter
landowner-applicant of the approval thereof by the PARC, and the transfer of the period of time.
shares of stocks in the names of the qualified beneficiaries shall be recorded in
stock and transfer books and submitted to the Securities and Exchange Commission
Taking into account the above discussion, the revocation of the SDP by PARC should
(SEC) within sixty (60) days from the said implementation of the stock distribution
be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the
plan. (Emphasis supplied.)
PARC and the DAR have the power to issue rules and regulations, substantive or
procedural. Being a product of such rule-making power, DAO 10 has the force and
It is evident from the foregoing provision that the implementation, that is, the effect of law and must be duly complied with.143 The PARC is, therefore, correct in
distribution of the shares of stock to the FWBs, must be made within three (3) revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November
months from receipt by HLI of the approval of the stock distribution plan by PARC. 21, l989 approving the HLI’s SDP is nullified and voided.
While neither of the clashing parties has made a compelling case of the thrust of
this provision, the Court is of the view and so holds that the intent is to compel the
III.
corporate landowner to complete, not merely initiate, the transfer process of
shares within that three-month timeframe. Reinforcing this conclusion is the 60-day
We now resolve the petitions-in-intervention which, at bottom, uniformly pray for
stock transfer recording (with the SEC) requirement reckoned from the
the exclusion from the coverage of the assailed PARC resolution those portions of
implementation of the SDP.
the converted land within Hacienda Luisita which RCBC and LIPCO acquired by
purchase.
To the Court, there is a purpose, which is at once discernible as it is practical, for the
three-month threshold. Remove this timeline and the corporate landowner can
Both contend that they are innocent purchasers for value of portions of the
veritably evade compliance with agrarian reform by simply deferring to absurd
converted farm land. Thus, their plea for the exclusion of that portion from PARC
limits the implementation of the stock distribution scheme.
Resolution 2005-32-01, as implemented by a DAR-issued Notice of Coverage dated
January 2, 2006, which called for mandatory CARP acquisition coverage of lands
The argument is urged that the thirty (30)-year distribution program is justified by
subject of the SDP.
the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land
distribution under CARP shall be made in thirty (30) annual amortizations. To HLI,
To restate the antecedents, after the conversion of the 500 hectares of land in
Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while ceding the
remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the entire
three hundred (300) hectares of land from Centennary for the purpose of
developing the land into an industrial complex. 144 Accordingly, the TCT in
Centennary’s name was canceled and a new one issued in LIPCO’s name.
Thereafter, said land was subdivided into two (2) more parcels of land. Later on,
LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by virtue
of which TCTs in the name of RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered
owner receiving a certificate of title in pursuance of a decree of registration and
every subsequent purchaser of registered land taking a certificate of title for value
and in good faith shall hold the same free from all encumbrances except those
noted on the certificate and enumerated therein."145
It is settled doctrine that one who deals with property registered under the Torrens
system need not go beyond the four corners of, but can rely on what appears on,
the title. He is charged with notice only of such burdens and claims as are
annotated on the title. This principle admits of certain exceptions, such as when the
party has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry, or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of the title of the
property in litigation.146 A higher level of care and diligence is of course expected
from banks, their business being impressed with public interest. 147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without notice
that some other person has a right to, or interest in, such property at the time of
such purchase, or before he has notice of the claim or interest of some other
persons in the property. Good faith, or the lack of it, is in the final analysis a
question of intention; but in ascertaining the intention by which one is actuated on
a given occasion, we are necessarily controlled by the evidence as to the conduct
and outward acts by which alone the inward motive may, with safety, be
determined. Truly, good faith is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judged by actual
or fancied tokens or signs. Otherwise stated, good faith x x x refers to the state of
mind which is manifested by the acts of the individual concerned.148 (Emphasis
supplied.)
In fine, there are two (2) requirements before one may be considered a purchaser
in good faith, namely: (1) that the purchaser buys the property of another without
notice that some other person has a right to or interest in such property; and (2)
that the purchaser pays a full and fair price for the property at the time of such
purchase or before he or she has notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC are––based on the above
requirements and with respect to the adverted transactions of the converted land
in question––purchasers in good faith for value entitled to the benefits arising from
such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of
industrial land, there was no notice of any supposed defect in the title of its
transferor, Centennary, or that any other person has a right to or interest in such
property. In fact, at the time LIPCO acquired said parcels of land, only the following
annotations appeared on the TCT in the name of Centennary: the Secretary’s
Certificate in favor of Teresita Lopa, the Secretary’s Certificate in favor of Shintaro
Murai, and the conversion of the property from agricultural to industrial and
residential use.149
The same is true with respect to RCBC. At the time it acquired portions of Hacienda
Luisita, only the following general annotations appeared on the TCTs of LIPCO: the
Deed of Restrictions, limiting its use solely as an industrial estate; the Secretary’s
Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in
favor of RCBC to guarantee the payment of PhP 300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots
that were previously covered by the SDP. Good faith "consists in the possessor’s
belief that the person from whom he received it was the owner of the same and
could convey his title. Good faith requires a well-founded belief that the person
from whom title was received was himself the owner of the land, with the right to
convey it. There is good faith where there is an honest intention to abstain from
taking any unconscientious advantage from another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they acquired.
However, they are of the honest belief that the subject lots were validly converted
to commercial or industrial purposes and for which said lots were taken out of the
CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally
and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows
conversion and disposition of agricultural lands previously covered by CARP land
acquisition "after the lapse of five (5) years from its award when the land ceases to
be economically feasible and sound for agricultural purposes or the locality has
become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes." Moreover, DAR notified all the affected parties,
more particularly the FWBs, and gave them the opportunity to comment or oppose
the proposed conversion. DAR, after going through the necessary processes,
granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform
matters and its original exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR conversion order became final and
executory after none of the FWBs interposed an appeal to the CA. In this factual
setting, RCBC and LIPCO purchased the lots in question on their honest and well-
founded belief that the previous registered owners could legally sell and convey the
lots though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO
acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value.
Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount
of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998. 151 On the other
hand, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed
portions of Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a
loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which
cannot just be disregarded by DAR, PARC or even by this Court. As held in Spouses
Chua v. Soriano:
With the property in question having already passed to the hands of purchasers in
good faith, it is now of no moment that some irregularity attended the issuance of
the SPA, consistent with our pronouncement in Heirs of Spouses Benito Gavino and
Juana Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract cannot be
valid, is inapplicable in this case as it will directly contravene the Torrens system of
registration. Where innocent third persons, relying on the correctness of the
certificate of title thus issued, acquire rights over the property, the court cannot
disregard such rights and order the cancellation of the certificate. The effect of
such outright cancellation will be to impair public confidence in the certificate of
title. The sanctity of the Torrens system must be preserved; otherwise, everyone
dealing with the property registered under the system will have to inquire in every
instance as to whether the title had been regularly or irregularly issued, contrary to
the evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to the
property. A purchaser in good faith holds an indefeasible title to the property and
he is entitled to the protection of the law.152 x x x (Emphasis supplied.)
To be sure, the practicalities of the situation have to a point influenced Our
disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow
from Association of Small Landowners in the Philippines, Inc.,153 is not a "cloistered
institution removed" from the realities on the ground. To note, the approval and
issuances of both the national and local governments showing that certain portions
of Hacienda Luisita have effectively ceased, legally and physically, to be agricultural
and, therefore, no longer CARPable are a matter of fact which cannot just be
ignored by the Court and the DAR. Among the approving/endorsing issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan
of Tarlac favorably endorsing the 300-hectare industrial estate project of
LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996
issued in accordance with the Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997,
approving LIPCO’s application for a mixed ecozone and proclaiming the
three hundred (300) hectares of the industrial land as a Special Economic
Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of
Tarlac, approving the Final Development Permit for the Luisita Industrial
Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita
Industrial Park II Project issued by the Office of the Sangguniang Bayan of
Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October 1997
issued for the proposed project of building an industrial complex on three
hundred (300) hectares of industrial land;156
(g) Certificate of Registration No. 00794 dated 26 December 1997 issued
by the HLURB on the project of Luisita Industrial Park II with an area of
three million (3,000,000) square meters;157
 (h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB
authorizing the sale of lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain
Parcels of Private Land in Barangay San Miguel, Municipality of Tarlac,
Province of Tarlac, as a Special Economic Zone pursuant to Republic Act
No. 7916," designating the Luisita Industrial Park II consisting of three
hundred hectares (300 has.) of industrial land as a Special Economic Zone;
and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by
the PEZA, stating that pursuant to Presidential Proclamation No. 1207
dated 22 April 1998 and Republic Act No. 7916, LIPCO has been registered
as an Ecozone Developer/Operator of Luisita Industrial Park II located in
San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in an
economic zone does not automatically allow the corporate or individual landowner
to change its use,158 the reclassification process is a prima facie indicium that the
land has ceased to be economically feasible and sound for agricultural uses. And if
only to stress, DAR Conversion Order No. 030601074-764-(95) issued in 1996 by
then DAR Secretary Garilao had effectively converted 500 hectares of hacienda land
from agricultural to industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion
order, both RCBC and LIPCO cannot be considered at fault for believing that certain
portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside
the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion
when it placed LIPCO’s and RCBC’s property which once formed part of Hacienda
Luisita under the CARP compulsory acquisition scheme via the assailed Notice of
Coverage.
As regards the 80.51-hectare land transferred to the government for use as part of
the SCTEX, this should also be excluded from the compulsory agrarian reform
coverage considering that the transfer was consistent with the government’s
exercise of the power of eminent domain159 and none of the parties actually
questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC
Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to
certain "operative facts" that had occurred in the interim. Pertinently, the
"operative fact" doctrine realizes that, in declaring a law or executive action null
and void, or, by extension, no longer without force and effect, undue harshness and
resulting unfairness must be avoided. This is as it should realistically be, since rights
might have accrued in favor of natural or juridical persons and obligations justly
incurred in the meantime.160 The actual existence of a statute or executive act is,
prior to such a determination, an operative fact and may have consequences which
cannot justly be ignored; the past cannot always be erased by a new judicial
declaration.161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be
given to a legislative or executive act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an appropriate case, declares
its invalidity, it is entitled to obedience and respect. Parties may have acted under it
and may have changed their positions. What could be more fitting than that in a
subsequent litigation regard be had to what has been done while such legislative or
executive act was in operation and presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being nullified, its existence as a fact must be
reckoned with. This is merely to reflect awareness that precisely because the
judiciary is the government organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have elapsed before
it can exercise the power of judicial review that may lead to a declaration of nullity.
It would be to deprive the law of its quality of fairness and justice then, if there be
no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a
statute, prior to such a determination of [unconstitutionality], is an operative fact
and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling
as to invalidity may have to be considered in various aspects,––with respect to
particular relations, individual and corporate, and particular conduct, private and
official." x x x
Given the above perspective and considering that more than two decades had
passed since the PARC’s approval of the HLI’s SDP, in conjunction with numerous
activities performed in good faith by HLI, and the reliance by the FWBs on the
legality and validity of the PARC-approved SDP, perforce, certain rights of the
parties, more particularly the FWBs, have to be respected pursuant to the
application in a general way of the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of minimal
or altogether without relevance to the instant case as it applies only in considering
the effects of a declaration of unconstitutionality of a statute, and not of a
declaration of nullity of a contract. This is incorrect, for this view failed to consider
is that it is NOT the SDOA dated May 11, 1989 which was revoked in the instant
case. Rather, it is PARC’s approval of the HLI’s Proposal for Stock Distribution under
CARP which embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI,
and the qualified FWBs executed the SDOA. This agreement provided the basis and
mechanics of the SDP that was subsequently proposed and submitted to DAR for
approval. It was only after its review that the PARC, through then Sec. Defensor-
Santiago, issued the assailed Resolution No. 89-12-2 approving the SDP.
Considerably, it is not the SDOA which gave legal force and effect to the stock
distribution scheme but instead, it is the approval of the SDP under the PARC
Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandaman’s
recommendation to the PARC Excom, what he proposed is the recall/revocation of
PARC Resolution No. 89-12-2 approving HLI’s SDP, and not the revocation of the
SDOA. Sec. Pangandaman’s recommendation was favorably endorsed by the PARC
Validation Committee to the PARC Excom, and these recommendations were
referred to in the assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA
which was made the basis for the implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive acts––in this case, the
approval by PARC of the HLI proposal for stock distribution––is well-settled in our
jurisprudence. In Chavez v. National Housing Authority, 163 We held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no
longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative or executive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:
xxx xxx xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension,
as we have no reason to do so, much less retroactively apply such nullification to
deprive private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper
nonetheless confers legitimacy upon past acts or omissions done in reliance
thereof. Consequently, the existence of a statute or executive order prior to its
being adjudged void is an operative fact to which legal consequences are attached.
It would indeed be ghastly unfair to prevent private respondent from relying upon
the order of suspension in lieu of a formal leave application. (Citations omitted;
Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts was further
explicated by this Court in Rieta v. People,164 thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated — General
Order No. 60, issued by then President Ferdinand E. Marcos — was subsequently
declared by the Court, in Tañada v. Tuvera, 33 to have no force and effect. Thus, he
asserts, any evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Tañada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing therein
how such a declaration might affect acts done on a presumption of their validity,
the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and realistic
course set forth in Chicot County Drainage District vs. Baxter Bank to wit:
‘The courts below have proceeded on the theory that the Act of Congress, having
been found to be unconstitutional, was not a law; that it was inoperative,
conferring no rights and imposing no duties, and hence affording no basis for the
challenged decree. . . . It is quite clear, however, that such broad statements as to
the effect of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to [the determination of its
invalidity], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect
of the subsequent ruling as to invalidity may have to be considered in various
aspects — with respect to particular conduct, private and official. Questions of
rights claimed to have become vested, of status, of prior determinations deemed to
have finality and acted upon accordingly, of public policy in the light of the nature
both of the statute and of its previous application, demand examination. These
questions are among the most difficult of those which have engaged the attention
of courts, state and federal, and it is manifest from numerous decisions that an all-
inclusive statement of a principle of absolute retroactive invalidity cannot be
justified.’
xxx xxx xxx
"Similarly, the implementation/enforcement of presidential decrees prior to their
publication in the Official Gazette is ‘an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be erased by
a new judicial declaration . . . that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified.’"
The Chicot doctrine cited in Tañada advocates that, prior to the nullification of a
statute, there is an imperative necessity of taking into account its actual existence
as an operative fact negating the acceptance of "a principle of absolute retroactive
invalidity." Whatever was done while the legislative or the executive act was in
operation should be duly recognized and presumed to be valid in all respects. The
ASSO that was issued in 1979 under General Order No. 60 — long before our
Decision in Tañada and the arrest of petitioner — is an operative fact that can no
longer be disturbed or simply ignored. (Citations omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes
or recalls the SDP, what it actually revoked or recalled was the PARC’s approval of
the SDP embodied in Resolution No. 89-12-2. Consequently, what was actually
declared null and void was an executive act, PARC Resolution No. 89-12-2,165and
not a contract (SDOA). It is, therefore, wrong to say that it was the SDOA which was
annulled in the instant case. Evidently, the operative fact doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP
are upheld, the revocation must, by application of the operative fact principle, give
way to the right of the original 6,296 qualified FWBs to choose whether they want
to remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact
that in 1989, 93% of the FWBs agreed to the SDOA (or the MOA), which became the
basis of the SDP approved by PARC per its Resolution No. 89-12-2 dated November
21, 1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries
and cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of
the gross produce from agricultural lands, and 3% of the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare lot sold to SCTEX. HLI shares
totaling 118,391,976.85 were distributed as of April 22, 2005.166 On August 6, 20l0,
HLI and private respondents submitted a Compromise Agreement, in which HLI
gave the FWBs the option of acquiring a piece of agricultural land or remain as HLI
stockholders, and as a matter of fact, most FWBs indicated their choice of
remaining as stockholders. These facts and circumstances tend to indicate that
some, if not all, of the FWBs may actually desire to continue as HLI shareholders. A
matter best left to their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries as of
November 21, 1989 when the SDP was approved, they are not accorded the right to
acquire land but shall, however, continue as HLI stockholders. All the benefits and
homelots167 received by the 10,502 FWBs (6,296 original FWBs and 4,206 non-
qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall be respected
with no obligation to refund or return them since the benefits (except the
homelots) were received by the FWBs as farmhands in the agricultural enterprise of
HLI and other fringe benefits were granted to them pursuant to the existing
collective bargaining agreement with Tadeco. If the number of HLI shares in the
names of the original FWBs who opt to remain as HLI stockholders falls below the
guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall assign
additional shares to said FWBs to complete said minimum number of shares at no
cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not
obliged to return the same to HLI or pay for its value since this is a benefit granted
under the SDP. The homelots do not form part of the 4,915.75 hectares covered by
the SDP but were taken from the 120.9234 hectare residential lot owned by
Tadeco. Those who did not receive the homelots as of the revocation of the SDP on
December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no
longer be entitled to homelots. Thus, in the determination of the ultimate
agricultural land that will be subjected to land distribution, the aggregate area of
the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land subject
of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came
after compulsory coverage has taken place, the FWBs should have their
corresponding share of the land’s value. There is merit in the claim. Since the SDP
approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands
subject of the SDP will automatically be subject of compulsory coverage under Sec.
31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August
14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the
government from the area covered by SDP, then HLI and its subsidiary, Centennary,
shall be liable to the FWBs for the price received for said lots. HLI shall be liable for
the value received for the sale of the 200-hectare land to LRC in the amount of PhP
500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary,
Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP
750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for
the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the
500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into
account the payment of taxes and expenses relating to the transfer of the land and
HLI’s statement that most, if not all, of the proceeds were used for legitimate
corporate purposes. In order to determine once and for all whether or not all the
proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will
engage the services of a reputable accounting firm to be approved by the parties to
audit the books of HLI to determine if the proceeds of the sale of the 500-hectare
land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate
purposes, titling expenses and in compliance with the August 14, 1996 Conversion
Order. The cost of the audit will be shouldered by HLI. If after such audit, it is
determined that there remains a balance from the proceeds of the sale, then the
balance shall be distributed to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of the
land from 1989. We disagree. It should not be forgotten that the FWBs are also
stockholders of HLI, and the benefits acquired by the corporation from its
possession and use of the land ultimately redounded to the FWBs’ benefit based on
its business operations in the form of salaries, and other fringe benefits under the
CBA. To still require HLI to pay rent to the FWBs will result in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the SDP
although it will no longer be operating under the SDP, but pursuant to the
Corporation Code as a private stock corporation. The non-agricultural assets
amounting to PhP 393,924,220 shall remain with HLI, while the agricultural lands
valued at PhP 196,630,000 with an original area of 4,915.75 hectares shall be
turned over to DAR for distribution to the FWBs. To be deducted from said area are
the 500-hectare lot subject of the August 14, 1996 Conversion Order, the 80.51-
hectare SCTEX lot, and the total area of 6,886.5 square meters of individual lots that
should have been distributed to FWBs by DAR had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will be
transferred to DAR for land distribution to the FWBs. We find that the date of the
"taking" is November 21, 1989, when PARC approved HLI’s SDP per PARC Resolution
No. 89-12-2. DAR shall coordinate with LBP for the determination of just
compensation. We cannot use May 11, 1989 when the SDOA was executed, since it
was the SDP, not the SDOA, that was approved by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and
circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated
December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the
lands subject of HLI’s SDP under compulsory coverage on mandated land acquisition
scheme of the CARP, are hereby AFFIRMED with the MODIFICATION that the
original 6,296 qualified FWBs shall have the option to remain as stockholders of HLI.
DAR shall immediately schedule meetings with the said 6,296 FWBs and explain to
them the effects, consequences and legal or practical implications of their choice,
after which the FWBs will be asked to manifest, in secret voting, their choices in the
ballot, signing their signatures or placing their thumbmarks, as the case may be,
over their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is
entitled to 18,804.32 HLI shares, and, in case the HLI shares already given to him or
her is less than 18,804.32 shares, the HLI is ordered to issue or distribute additional
shares to complete said prescribed number of shares at no cost to the FWB within
thirty (30) days from finality of this Decision. Other FWBs who do not belong to the
original 6,296 qualified beneficiaries are not entitled to land distribution and shall
remain as HLI shareholders. All salaries, benefits, 3% production share and 3% share
in the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare
SCTEX lot and homelots already received by the 10,502 FWBs, composed of 6,296
original FWBs and 4,206 non-qualified FWBs, shall be respected with no obligation
to refund or return them.
Within thirty (30) days after determining who from among the original FWBs will
stay as stockholders, DAR shall segregate from the HLI agricultural land with an area
of 4,915.75 hectares subject of PARC’s SDP-approving Resolution No. 89-12-2 the
following: (a) the 500-hectare lot subject of the August 14, l996 Conversion Order;
(b) the 80.51-hectare lot sold to, or acquired by, the government as part of the
SCTEX complex; and (c) the aggregate area of 6,886.5 square meters of individual
lots that each FWB is entitled to under the CARP had he or she not opted to stay in
HLI as a stockholder. After the segregation process, as indicated, is done, the
remaining area shall be turned over to DAR for immediate land distribution to the
original qualified FWBs who opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to the
FWBs who stayed with the corporation shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out
of the 500 hectares covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned subsidiary, Centennary VELASCO, JR.,*
Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned
500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP LEONARDO-DE CASTRO, **
80,511,500 paid by the government through the Bases Conversion Development
Authority for the sale of the 80.51-hectare lot used for the construction of the DECISION
SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP
500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be
REYES, J.:
deducted the 3% of the total gross sales from the production of the agricultural
land and the 3% of the proceeds of said transfers that were paid to the FWBs, the
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
taxes and expenses relating to the transfer of titles to the transferees, and the
Court seeking to annul and set aside the Decision 1 dated August 28, 2008 and the
expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate
Resolution2 dated February 20, 2009 rendered by the Court of Appeals (CA) in CA-
purposes. For this purpose, DAR is ordered to engage the services of a reputable
G.R. SP No. 101159. The assailed decision annulled and set aside the Orders dated
accounting firm approved by the parties to audit the books of HLI and Centennary
April 12, 20073 and August 27, 20074 issued by the Regional Trial Court (RTC) of
Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the
Quezon City, Branch 81 in Civil Case No. Q-06-58834.
three (3) aforementioned lots were used or spent for legitimate corporate
purposes. Any unspent or unused balance as determined by the audit shall be
distributed to the 6,296 original FWBs. The Antecedent Facts

HLI is entitled to just compensation for the agricultural land that will be transferred On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in
to DAR to be reckoned from November 21, 1989 per PARC Resolution No. 89-12-2. the amount of Three Hundred Thousand U.S. Dollars (US$300,000.00) from
DAR and LBP are ordered to determine the compensation due to HLI. Theodore and Nancy Ang (petitioners). On even date, the respondents executed a
promissory note5 in favor of the petitioners wherein they promised to pay the latter
the said amount, with interest at the rate of ten percent (10%) per annum, upon
DAR shall submit a compliance report after six (6) months from finality of this
demand. However, despite repeated demands, the respondents failed to pay the
judgment. It shall also submit, after submission of the compliance report, quarterly
petitioners.
reports on the execution of this judgment to be submitted within the first 15 days
at the end of each quarter, until fully implemented.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter
asking them to pay their outstanding debt which, at that time, already amounted to
The temporary restraining order is lifted.
Seven Hundred Nineteen Thousand, Six Hundred Seventy-One U.S. Dollars and
Twenty-Three Cents (US$719,671.23), inclusive of the ten percent (10%) annual
SO ORDERED.
interest that had accumulated over the years. Notwithstanding the receipt of the
said demand letter, the respondents still failed to settle their loan obligation.
Republic of the Philippines
SUPREME COURT
On August 6, 2006, the petitioners, who were then residing in Los Angeles,
Manila
California, United States of America (USA), executed their respective Special Powers
of Attorney6 in favor of Attorney Eldrige Marvin B. Aceron (Atty. Aceron) for the
SECOND DIVISION purpose of filing an action in court against the respondents. On September 15,
2006, Atty. Aceron, in behalf of the petitioners, filed a Complaint 7 for collection of
G.R. No. 186993 August 22, 2012 sum of money with the RTC of Quezon City against the respondents.

THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B. On November 21, 2006, the respondents moved for the dismissal of the complaint
ACERON, Petitioners, filed by the petitioners on the grounds of improper venue and
vs. prescription.8 Insisting that the venue of the petitioners’ action was improperly laid,
SPOUSES ALAN and EM ANG, Respondents.
the respondents asserted that the complaint against them may only be filed in the
court of the place where either they or the petitioners reside. They averred that
they reside in Bacolod City while the petitioners reside in Los Angeles, California,
USA. Thus, the respondents maintain, the filing of the complaint against them in the
RTC of Quezon City was improper.
The RTC Orders
On April 12, 2007, the RTC of Quezon City issued an Order9 which, inter alia, denied
the respondents’ motion to dismiss. In ruling against the respondents’ claim of
improper venue, the court explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly states
that plaintiff Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly
appointed attorney-in-fact to prosecute her claim against herein defendants.
Considering that the address given by Atty. Aceron is in Quezon City, hence, being
the plaintiff, venue of the action may lie where he resides as provided in Section 2,
Rule 4 of the 1997 Rules of Civil Procedure.10
The respondents sought reconsideration of the RTC Order dated April 12, 2007,
asserting that there is no law which allows the filing of a complaint in the court of
the place where the representative, who was appointed as such by the plaintiffs
through a Special Power of Attorney, resides.11
The respondents’ motion for reconsideration was denied by the RTC of Quezon City
in its Order12 dated August 27, 2007.
13
The respondents then filed with the CA a petition for certiorari alleging in the
main that, pursuant to Section 2, Rule 4 of the Rules of Court, the petitioners’
complaint may only be filed in the court of the place where they or the petitioners
reside. Considering that the petitioners reside in Los Angeles, California, USA, the
respondents assert that the complaint below may only be filed in the RTC of
Bacolod City, the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners’ grant of Special Power of
Attorney in favor of Atty. Aceron notwithstanding, the said complaint may not be
filed in the court of the place where Atty. Aceron resides, i.e., RTC of Quezon City.
They explained that Atty. Aceron, being merely a representative of the petitioners,
is not the real party in interest in the case below; accordingly, his residence should
not be considered in determining the proper venue of the said complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and set
aside the Orders dated April 12, 2007 and August 27, 2007 of the RTC of Quezon
City and, accordingly, directed the dismissal of the complaint filed by the
petitioners. The CA held that the complaint below should have been filed in Bacolod
City and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of residence of the
plaintiff’s attorney-in-fact is of no moment when it comes to ascertaining the venue
of cases filed in behalf of the principal since what should be considered is the
residence of the real parties in interest, i.e., the plaintiff or the defendant, as the
case may be. Residence is the permanent home – the place to which, whenever
absent for business or pleasure, one intends to return. Residence is vital when
dealing with venue. Plaintiffs, herein private respondents, being residents of Los
Angeles, California, U.S.A., which is beyond the territorial jurisdiction of Philippine
courts, the case should have been filed in Bacolod City where the defendants,
herein petitioners, reside. Since the case was filed in Quezon City, where the
representative of the plaintiffs resides, contrary to Sec. 2 of Rule 4 of the 1997
Rules of Court, the trial court should have dismissed the case for improper venue. 15
The petitioners sought a reconsideration of the Decision dated August 28, 2008, but
it was denied by the CA in its Resolution dated February 20, 2009.16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue for this Court’s
resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF
LAW WHEN IT RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE GROUND
THAT VENUE WAS NOT PROPERLY LAID.17
The Court’s Ruling
The petition is denied.
Contrary to the CA’s disposition, the petitioners maintain that their complaint for
collection of sum of money against the respondents may be filed in the RTC of
Quezon City. Invoking Section 3, Rule 3 of the Rules of Court, they insist that Atty.
Aceron, being their attorney-in-fact, is deemed a real party in interest in the case
below and can prosecute the same before the RTC. Such being the case, the
petitioners assert, the said complaint for collection of sum of money may be filed in
the court of the place where Atty. Aceron resides, which is the RTC of Quezon City.
On the other hand, the respondents in their Comment18 assert that the petitioners
are proscribed from filing their complaint in the RTC of Quezon City. They assert
that the residence of Atty. Aceron, being merely a representative, is immaterial to
the determination of the venue of the petitioners’ complaint.
The petitioners’ complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal actions are fixed for the
convenience of the plaintiffs and their witnesses. Equally settled, however, is the
principle that choosing the venue of an action is not left to a plaintiff’s caprice; the
matter is regulated by the Rules of Court.19
The petitioners’ complaint for collection of sum of money against the respondents
is a personal action as it primarily seeks the enforcement of a contract. The Rules
give the plaintiff the option of choosing where to file his complaint. He can file it in
the place (1) where he himself or any of them resides, or (2) where the defendant
or any of the defendants resides or may be found. The plaintiff or the defendant
must be residents of the place where the action has been instituted at the time the
action is commenced.20
However, if the plaintiff does not reside in the Philippines, the complaint in such
case may only be filed in the court of the place where the defendant resides. In
Cohen and Cohen v. Benguet Commercial Co., Ltd.,21 this Court held that there can
be no election as to the venue of the filing of a complaint when the plaintiff has no
residence in the Philippines. In such case, the complaint may only be filed in the
court of the place where the defendant resides. Thus:
Section 377 provides that actions of this character "may be brought in any province
where the defendant or any necessary party defendant may reside or be found, or
in any province where the plaintiff or one of the plaintiffs resides, at the election of
the plaintiff." The plaintiff in this action has no residence in the Philippine Islands.
Only one of the parties to the action resides here. There can be, therefore, no
election by plaintiff as to the place of trial. It must be in the province where the
defendant resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the
respondents reside in Bacolod City. Applying the foregoing principles, the
petitioners’ complaint against the respondents may only be filed in the RTC of
Bacolod City – the court of the place where the respondents reside. The petitioners,
being residents of Los Angeles, California, USA, are not given the choice as to the
venue of the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside the
orders of the RTC of Quezon City and consequently dismissed the petitioners’
complaint against the respondents on the ground of improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil
actions is fixed by the Rules of Court to attain the greatest convenience possible to
the litigants and their witnesses by affording them maximum accessibility to the
courts.23 And even as the regulation of venue is primarily for the convenience of the
plaintiff, as attested by the fact that the choice of venue is given to him, it should
not be construed to unduly deprive a resident defendant of the rights conferred
upon him by the Rules of Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners’ claim, Atty. Aceron, despite being the attorney-in-fact
of the petitioners, is not a real party in interest in the case below. Section 2, Rule 3
of the Rules of Court reads:
Sec. 2. Parties in interest. – A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails
of the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest. (Emphasis ours)
Interest within the meaning of the Rules of Court means material interest or an
interest in issue to be affected by the decree or judgment of the case, as
distinguished from mere curiosity about the question involved. 25 A real party in
interest is the party who, by the substantive law, has the right sought to be
enforced.26
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest
in the case below as he does not stand to be benefited or injured by any judgment
therein. He was merely appointed by the petitioners as their attorney-in-fact for the
limited purpose of filing and prosecuting the complaint against the respondents.
Such appointment, however, does not mean that he is subrogated into the rights of
petitioners and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal
capacity does not have the right to file the complaint below against the
respondents. He may only do so, as what he did, in behalf of the petitioners – the
real parties in interest. To stress, the right sought to be enforced in the case below
belongs to the petitioners and not to Atty. Aceron. Clearly, an attorney-in-fact is not
a real party in interest.27
The petitioner’s reliance on Section 3, Rule 3 of the Rules of Court to support their
conclusion that Atty. Aceron is likewise a party in interest in the case below is
misplaced. Section 3, Rule 3 of the Rules of Court provides that:
Sec. 3. Representatives as parties. – Where the action is allowed to be prosecuted
and defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the
real property in interest. A representative may be a trustee of an expert trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed principal may
sue or be sued without joining the principal except when the contract involves
things belonging to the principal. (Emphasis ours)
Nowhere in the rule cited above is it stated or, at the very least implied, that the
representative is likewise deemed as the real party in interest. The said rule simply
states that, in actions which are allowed to be prosecuted or defended by a
representative, the beneficiary shall be deemed the real party in interest and,
hence, should be included in the title of the case.
Indeed, to construe the express requirement of residence under the rules on venue
as applicable to the attorney-in-fact of the plaintiff would abrogate the meaning of
a "real party in interest", as defined in Section 2 of Rule 3 of the 1997 Rules of Court
vis-à-vis Section 3 of the same Rule.28
On this score, the CA aptly observed that:
As may be unerringly gleaned from the foregoing provisions, there is nothing
therein that expressly allows, much less implies that an action may be filed in the
city or municipality where either a representative or an attorney-in-fact of a real
party in interest resides. Sec. 3 of Rule 3 merely provides that the name or names of
the person or persons being represented must be included in the title of the case
and such person or persons shall be considered the real party in interest. In other
words, the principal remains the true party to the case and not the representative.
Under the plain meaning rule, or verba legis, if a statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without interpretation.
xxx29 (Citation omitted)
At this juncture, it bears stressing that the rules on venue, like the other procedural
rules, are designed to insure a just and orderly administration of justice or the
impartial and even-handed determination of every action and proceeding.
Obviously, this objective will not be attained if the plaintiff is given unrestricted
freedom to choose the court where he may file his complaint or petition. The
choice of venue should not be left to the plaintiff's whim or caprice. He may be
impelled by some ulterior motivation in choosing to file a case in a particular court
even if not allowed by the rules on venue.30
WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED.
The Decision dated August 28, 2008 and Resolution dated February 20, 2009
rendered by the Court of Appeals in CA-G.R. SP No. 101159 are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 173297 March 6, 2013
STRONGHOLD INSURANCE COMPANY, INC., Petitioner,
vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T.
TAYACTAC, and MANUEL D. MARANON, JR., Respondents.
DECISION
BERSAMIN, J.:
The personality of a corporation is distinct and separate from the personalities of its
stockholders. Hence, its stockholders are not themselves the real parties in interest
to claim and recover compensation for the damages arising from the wrongful
attachment of its assets. Only the corporation is the real party in interest for that
purpose.
 The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic insurance
company, assails the decision promulgated on January 31, 2006,1 whereby the
Court of Appeals (CA) in CA-G.R. CV No. 79145 affirmed the judgment rendered on
April 28, 2003 by the Regional Trial Court in Parafiaque City (RTC) holding
Stronghold Insurance and respondent Manuel D. Marafion, Jr. jointly and solidarily
liable for damages to respondents Tomas Cuenca, Marcelina Cuenca, Milagros
Cuenca (collectively referred to as Cuencas), and Bramie Tayactac, upon the latter’s
claims against the surety bond issued by Stronghold Insurance for the benefit of
Marañon.2
Antecedents
On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas for
the collection of a sum of money and damages. His complaint, docketed as Civil
Case No. 98-023, included an application for the issuance of a writ of preliminary
attachment.3 On January 26, 1998, the RTC granted the application for the issuance
of the writ of preliminary attachment conditioned upon the posting of a bond
of P1,000,000.00 executed in favor of the Cuencas. Less than a month later,
Marañon amended the complaint to implead Tayactac as a defendant.4
On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No. 02370 in
the amount of P1,000,000.00 issued by Stronghold Insurance. Two days later, the
RTC issued the writ of preliminary attachment.5 The sheriff served the writ, the
summons and a copy of the complaint on the Cuencas on the same day. The service
of the writ, summons and copy of the complaint were made on Tayactac on
February 16, 1998.6
Enforcing the writ of preliminary attachment on February 16 and February 17, 1998,
the sheriff levied upon the equipment, supplies, materials and various other
personal property belonging to Arc Cuisine, Inc. that were found in the leased
corporate office-cum-commissary or kitchen of the corporation.7 On February 19,
1998, the sheriff submitted a report on his proceedings, 8 and filed an ex parte
motion seeking the transfer of the levied properties to a safe place. The RTC
granted the ex parte motion on February 23, 1998.9
On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to
Dismiss and to Quash Writ of Preliminary Attachment on the grounds that: (1) the
action involved intra-corporate matters that were within the original and exclusive
jurisdiction of the Securities and Exchange Commission (SEC); and (2) there was
another action pending in the SEC as well as a criminal complaint in the Office of
the City Prosecutor of Parañaque City.10
On March 5, 1998, Marañon opposed the motion.11
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of
Preliminary Attachment, stating that the action, being one for the recovery of a sum
of money and damages, was within its jurisdiction. 12
Under date of September 3, 1998, the Cuencas and Tayactac moved for the
reconsideration of the denial of their Motion to Dismiss and to Quash Writ of
Preliminary Attachment, but the RTC denied their motion for reconsideration on
September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari
and prohibition to challenge the August 10, 1998 and September 16, 1998 orders of
the RTC on the basis of being issued with grave abuse of discretion amounting to
lack or excess of jurisdiction (C.A.-G.R. SP No. 49288).13
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No.
49288,14 granting the petition. It annulled and set aside the challenged orders, and
dismissed the amended complaint in Civil Case No. 98-023 for lack of jurisdiction, to
wit:
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET ASIDE, and
the judgment is hereby rendered DISMISSING the Amended Complaint in Civil Case
No. 98-023 of the respondent court, for lack of jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and resolution of
the Cuencas and Tayactac’s claim for the damages sustained from the enforcement
of the writ of preliminary attachment.15
On February 17, 2000,16 the sheriff reported to the RTC, as follows:
On the scheduled inventory of the properties (February 17, 2000) and to comply
with the Resolution of the Court of Appeals dated December 24, 1999 ordering the
delivery of the attached properties to the defendants, the proceedings thereon
being:
1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit,
Atty. Ayo, defendant Marcelina Cuenca, and two Court Personnel,
Robertson Catorce and Danilo Abanto, went to the warehouse where Mr.
Marañon recommended for safekeeping the properties in which he
 personally assured its safety, at No. 14, Marian II Street, East Service Road,
Parañaque Metro Manila.
2. That to our surprise, said warehouse is now tenanted by a new lessee
and the properties were all gone and missing.
3. That there are informations (sic) that the properties are seen at Conti’s
Pastry & Bake Shop owned by Mr. Marañon, located at BF Homes in
Parañaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to
Deliver Attached Properties and to Set Case for Hearing,17 praying that: (1) the
Branch Sheriff be ordered to immediately deliver the attached properties to them;
(2) Stronghold Insurance be directed to pay them the damages being sought in
accordance with its undertaking under the surety bond for P1,000,0000.00; (3)
Marañon be held personally liable to them considering the insufficiency of the
amount of the surety bond; (4) they be paid the total of P1,721,557.20 as actual
damages representing the value of the lost attached properties because they, being
accountable for the properties, would be turning that amount over to Arc Cuisine,
Inc.; and (5) Marañon be made to pay P200,000.00 as moral damages, P100,000.00
as exemplary damages, and P100,000.00 as attorney’s fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the
Cuencas and Tayactac filed their reply on May 5, 2000.
On May 25, 2000, Marañon filed his own comment/opposition to the Motion to
Require Sheriff to Deliver Attached Properties and to Set Case for Hearing of the
Cuencas and Tayactac, arguing that because the attached properties belonged to
Arc Cuisine, Inc. 50% of the stockholding of which he and his relatives owned, it
should follow that 50% of the value of the missing attached properties constituted
liquidating dividends that should remain with and belong to him. Accordingly, he
prayed that he should be required to return only P100,000.00 to the Cuencas and
Tayactac.18
On June 5, 2000, the RTC commanded Marañon to surrender all the attached
properties to the RTC through the sheriff within 10 days from notice; and directed
the Cuencas and Tayactac to submit the affidavits of their witnesses in support of
their claim for damages.19
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and
Compliance.20
Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding Marañon and
Stronghold Insurance jointly and solidarily liable for damages to the Cuencas and
Tayactac,21 viz:
WHEREFORE, premises considered, as the defendants were able to preponderantly
prove their entitlement for damages by reason of the unlawful and wrongful
issuance of the writ of attachment, MANUEL D. MARAÑON, JR., plaintiff and
defendant, Stronghold Insurance Company Inc., are found to be jointly and
solidarily liable to pay the defendants the following amount to wit:
(1) PhP1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorney’s fees; and
(5) To pay the cost of suit.
SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145), assigning
the following errors to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO PAY THE AMOUNT
OF P1,000,000.00 REPRESENTING THE AMOUNT OF THE BOND AND OTHER
DAMAGES TO THE DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE INDEMNITY
AGREEMENT (EXH. "2-SURETY") EXECUTED BY MANUEL D. MARAÑON, JR. IN FAVOR
OF STRONGHOLD WHEREIN HE BOUND HIMSELF TO INDEMNIFY STRONGHOLD OF
WHATEVER AMOUNT IT MAY BE HELD LIABLE ON ACCOUNT OF THE ISSUANCE OF
THE ATTACHMENT BOND.22
On January 31, 2006, the CA, finding no reversible error, promulgated its decision
affirming the judgment of the RTC. 23
Stronghold Insurance moved for reconsideration, but the CA denied its motion for
reconsideration on June 22, 2006.
Issues
Hence, this appeal by petition for review on certiorari by Stronghold Insurance,
which submits that:
I.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED
QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND
APPLICABLE DECISIONS OF THE HONORABLE COURT CONSIDERING THAT THE
COURT OF APPEALS AFFIRMED THE ERRONEOUS DECISION OF THE TRIAL COURT
HOLDING RESPONDENT MARA[Ñ]ON AND PETITIONER STRONGHOLD JOINTLY AND
SOLIDARILY LIABLE TO PAY THE RESPONDENTS CUENCA, et al., FOR PURPORTED
DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF
THE WRIT OF ATTACHMENT, DESPITE THE FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE
PROPERTIES ATTACHED AND THUS, ARE NOT THE PROPER PARTIES TO
CLAIM ANY PURPORTED DAMAGES ARISING THEREFROM.
B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL
AND WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT WERE CAUSED
BY THE NEGLIGENCE OF THE BRANCH SHERIFF OF THE TRIAL COURT AND
HIS FAILURE TO COMPLY WITH THE PROVISIONS OF THE RULES OF COURT
PERTAINING TO THE ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER
STRONGHOLD TO BE SOLIDARILY LIABLE WITH RESPONDENT MARA[Ñ]ON
TO RESPONDENTS CUENCA et al., FOR MORAL DAMAGES, EXEMPLARY
DAMAGES, ATTORNEY’S FEES AND COST OF SUIT DESPITE THE FACT THAT
THE GUARANTY OF PETITIONER STRONGHOLD PURSUANT TO ITS SURETY
BOND IS LIMITED ONLY TO THE AMOUNT OF P1,000,000.00.
II
IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD HAVE HELD
RESPONDENT MARA[Ñ]ON TO BE LIABLE TO INDEMNIFY PETITIONER STRONGHOLD
FOR ALL PAYMENTS, DAMAGES, COSTS, LOSSES, PENALTIES, CHARGES AND
EXPENSES IT SUSTAINED IN CONNECTION WITH THE INSTANT CASE, PURSUANT TO
THE INDEMNITY AGREEMENT ENTERED INTO BY PETITIONER STRONGHOLD AND
RESPONDENT MARA[Ñ]ON.24
On their part, the Cuencas and Tayactac counter:
A. Having actively participated in the trial and appellate proceedings of this
case before the Regional Trial Court and the Court of Appeals, respectively,
petitioner Stronghold is legally and effectively BARRED by ESTOPPEL from
raising for the first time on appeal before this Honorable Court a defense
and/or issue not raised below.25
B. Even assuming arguendo without admitting that the principle of
estoppel is not applicable in this instant case, the assailed Decision and
Resolution find firm basis in law considering that the writ of attachment
issued and enforced against herein respondents has been declared
ILLEGAL, NULL AND VOID for having been issued beyond the jurisdiction of
the trial court.
C. There having been a factual and legal finding of the illegality of the
issuance and consequently, the enforcement of the writ of attachment,
Maranon and his surety Stronghold, consistent with the facts and the law,
including the contract of suretyship they entered into, are JOINTLY AND
SEVERALLY liable for the damages sustained by herein respondents by
reason thereof.
D. Contrary to the allegations of Stronghold, its liability as surety under the
attachment bond without which the writ of attachment shall not issue and
be enforced against herein respondent if prescribed by law. In like manner,
the obligations and liability on the attachment bond are also prescribed by
law and not left to the discretion or will of the contracting parties to the
prejudice of the persons against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the damages
sustained by herein respondents is both a statutory and contractual
obligation and for which, it cannot escape accountability and liability in
favor of the person against whom the illegal writ of attachment was issued
and enforced. To allow Stronghold to delay, excuse or exempt itself from
liability is unconstitutional, unlawful, and contrary to the basic tenets of
equity and fair play.
 F. While the liability of Stronghold as surety indeed covers the principal
amount of P1,000,000.00, nothing in the law and the contract between the
parties limit or exempt Stronghold from liability for other damages.
Including costs of suit and interest.26
In his own comment,27
Marañon insisted that he could not be personally held liable under the attachment
bond because the judgment of the RTC was rendered without jurisdiction over the
subject matter of the action that involved an intra-corporate controversy among
the stockholders of Arc Cuisine, Inc.; and that the jurisdiction properly pertained to
the SEC, where another action was already pending between the parties.
Ruling
Although the question of whether the Cuencas and Tayactac could themselves
recover damages arising from the wrongful attachment of the assets of Arc Cuisine,
Inc. by claiming against the bond issued by Stronghold Insurance was not raised in
the CA, we do not brush it aside because the actual legal interest of the parties in
the subject of the litigation is a matter of substance that has jurisdictional impact,
even on appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be disallowed immediately if it involves
a person without any interest at stake, for it would be futile and meaningless to still
proceed and render a judgment where there is no actual controversy to be thereby
determined. Courts of law in our judicial system are not allowed to delve on
academic issues or to render advisory opinions. They only resolve actual
controversies, for that is what they are authorized to do by the Fundamental Law
itself, which forthrightly ordains that the judicial power is wielded only to settle
actual controversies involving rights that are legally demandable and enforceable. 28
To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of
the Rules of Court requires that unless otherwise authorized by law or the Rules of
Court every action must be prosecuted or defended in the name of the real party in
interest.29 Under the same rule, a real party in interest is one who stands to be
benefited or injured by the judgment in the suit, or one who is entitled to the avails
of the suit. Accordingly, a person , to be a real party in interest in whose name an
action must be prosecuted, should appear to be the present real owner of the right
sought to be enforced, that is, his interest must be a present substantial interest,
not a mere expectancy, or a future, contingent, subordinate, or consequential
interest.30
Where the plaintiff is not the real party in interest, the ground for the motion to
dismiss is lack of cause of action.31The reason for this is that the courts ought not to
pass upon questions not derived from any actual controversy. Truly, a person
having no material interest to protect cannot invoke the jurisdiction of the court as
the plaintiff in an action.32 Nor does a court acquire jurisdiction over a case where
the real party in interest is not present or impleaded.
The purposes of the requirement for the real party in interest prosecuting or
defending an action at law are: (a) to prevent the prosecution of actions by persons
without any right, title or interest in the case; (b) to require that the actual party
entitled to legal relief be the one to prosecute the action; (c) to avoid a multiplicity
of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant
to sound public policy.33 Indeed, considering that all civil actions must be based on a
cause of action,34 defined as the act or omission by which a party violates the right
of another,35 the former as the defendant must be allowed to insist upon being
opposed by the real party in interest so that he is protected from further suits
regarding the same claim.36 Under this rationale, the requirement benefits the
defendant because "the defendant can insist upon a plaintiff who will afford him a
setup providing good res judicata protection if the struggle is carried through on the
merits to the end."37
The rule on real party in interest ensures, therefore, that the party with the legal
right to sue brings the action, and this interest ends when a judgment involving the
nominal plaintiff will protect the defendant from a subsequent identical action.
Such a rule is intended to bring before the court the party rightfully interested in
the litigation so that only real controversies will be presented and the judgment,
when entered, will be binding and conclusive and the defendant will be saved from
further harassment and vexation at the hands of other claimants to the same
demand.38
But the real party in interest need not be the person who ultimately will benefit
from the successful prosecution of the action. Hence, to aid itself in the proper
identification of the real party in interest, the court should first ascertain the nature
of the substantive right being asserted, and then must determine whether the party
asserting that right is recognized as the real party in interest under the rules of
procedure. Truly, that a party stands to gain from the litigation is not necessarily
controlling.39
It is fundamental that the courts are established in order to afford reliefs to persons
whose rights or property interests have been invaded or violated, or are threatened
with invasion by others’ conduct or acts, and to give relief only at the instance of
such persons. The jurisdiction of a court of law or equity may not be invoked by or
for an individual whose rights have not been breached.40
The remedial right or the remedial obligation is the person’s interest in the
controversy. The right of the plaintiff or other claimant is alleged to be violated by
the defendant, who has the correlative obligation to respect the right of the former.
Otherwise put, without the right, a person may not become a party plaintiff;
without the obligation, a person may not be sued as a party defendant; without the
violation, there may not be a suit. In such a situation, it is legally impossible for any
person or entity to be both plaintiff and defendant in the same action, thereby
ensuring that the controversy is actual and exists between adversary parties. Where
there are no adversary parties before it, the court would be without jurisdiction to
render a judgment.41
There is no dispute that the properties subject to the levy on attachment belonged
to Arc Cuisine, Inc. alone, not to the Cuencas and Tayactac in their own right. They
were only stockholders of Arc Cuisine, Inc., which had a personality distinct and
separate from that of any or all of them.42 The damages occasioned to the
properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine, Inc.,
not them. As such, only Arc Cuisine, Inc. had the right under the substantive law to
claim and recover such damages. This right could not also be asserted by the
Cuencas and Tayactac unless they did so in the name of the corporation itself. But
that did not happen herein, because Arc Cuisine, Inc. was not even joined in the
action either as an original party or as an intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest in the
personal properties coming under the levy on attachment by virtue alone of their
being stockholders in Arc Cuisine, Inc. Their stockholdings represented only their
proportionate or aliquot interest in the properties of the corporation, but did not
vest in them any legal right or title to any specific properties of the corporation.
Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person. 43
Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas
and Tayactac lacked the legal personality to claim the damages sustained from the
levy of the former’s properties. According to Asset Privatization Trust v. Court of
Appeals,44 even when the foreclosure on the assets of the corporation was wrongful
and done in bad faith the stockholders had no standing to recover for themselves
moral damages; otherwise, they would be appropriating and distributing part of the
corporation’s assets prior to the dissolution of the corporation and the liquidation
of its debts and liabilities. Moreover, in Evangelista v. Santos,45 the Court, resolving
whether or not the minority stockholders had the right to bring an action for
damages against the principal officers of the corporation for their own benefit, said:
As to the second question, the complaint shows that the action is for damages
resulting from mismanagement of the affairs and assets of the corporation by its
principal officer, it being alleged that defendant’s maladministration has brought
about the ruin of the corporation and the consequent loss of value of its stocks. The
injury complained of is thus primarily to the corporation, so that the suit for the
damages claimed should be by the corporation rather than by the stockholders (3
Fletcher, Cyclopedia of Corporation pp. 977-980). The stockholders may not directly
claim those damages for themselves for that would result in the appropriation by,
and the distribution among them of part of the corporate assets before the
dissolution of the corporation and the liquidation of its debts and liabilities,
something which cannot be legally done in view of section 16 of the Corporation
Law, which provides:
No shall corporation shall make or declare any stock or bond dividend or any
dividend whatsoever except from the surplus profits arising from its business, or
divide or distribute its capital stock or property other than actual profits among its
members or stockholders until after the payment of its debts and the termination
of its existence by limitation or lawful dissolution.
xxxx
In the present case, the plaintiff stockholders have brought the action not for the
benefit of the corporation but for their own benefit, since they ask that the
defendant make good the losses occasioned by his mismanagement and pay to
them the value of their respective participation in the corporate assets on the basis
of their respective holdings. Clearly, this cannot be done until all corporate debts, if
there be any, are paid and the existence of the corporation terminated by the
limitation of its charter or by lawful dissolution in view of the provisions of section
16 of the Corporation Law. (Emphasis ours)
It results that plaintiffs complaint shows no cause of action in their favor so that the
lower court did not err in dismissing the complaint on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the
requirement of section 16 of the Corporation Law be first complied with, we note
that the action stated in their complaint is susceptible of being converted into a
derivative suit for the benefit of the corporation by a mere change in the prayer.
Such amendment, however, is not possible now, since the complaint has been filed
in the wrong court, so that the same has to be dismissed.46
That Marañon knew that Arc Cuisine, Inc. owned the properties levied on
attachment but he still excluded Arc Cuisine, Inc. from his complaint was of no
consequence now. The Cuencas and Tayactac still had no right of action even if the
affected properties were then under their custody at the time of the attachment,
considering that their custody was only incidental to the operation of the
corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine,
Inc. a proper action to recover damages resulting from the attachment. Such action
would be one directly brought in the name of the corporation. Yet, that was not
true here, for, instead, the Cuencas and Tayactac presented the claim in their own
names.
On August 23, 2005, petitioner-spouses Bill and Victoria Hing filed with the Regional
Trial Court (RTC) of Mandaue City a Complaint5 for Injunction and Damages with
prayer for issuance of a Writ of Preliminary Mandatory Injunction/Temporary
Restraining Order (TRO), docketed as Civil Case MAN-5223 and raffled to Branch 28,
against respondents Alexander Choachuy, Sr. and Allan Choachuy.

In view of the outcome just reached, the Court deems it unnecessary to give any Petitioners alleged that they are the registered owners of a parcel of land (Lot 1900-
extensive consideration to the remaining issues. B) covered by Transfer Certificate of Title (TCT) No. 42817 situated in Barangay
Basak, City of Mandaue, Cebu;6 that respondents are the owners of Aldo
WHEREFORE, the Court GRANTS the petition for review; and REVERSES and SETS Development & Resources, Inc. (Aldo) located at Lots 1901 and 1900-C, adjacent to
ASIDE the decision of the Court of Appeals in CA-G.R. CV No. 79145 promulgated on the property of petitioners;7 that respondents constructed an auto-repair shop
January 31,2006. building (Aldo Goodyear Servitec) on Lot 1900-C; that in April 2005, Aldo filed a case
against petitioners for Injunction and Damages with Writ of Preliminary
No pronouncements on costs of suit. Injunction/TRO, docketed as Civil Case No. MAN-5125;8 that in that case, Aldo
claimed that petitioners were constructing a fence without a valid permit and that
the said construction would destroy the wall of its building, which is adjacent to
SO ORDERED.
petitioners’ property;9 that the court, in that case, denied Aldo’s application for
preliminary injunction for failure to substantiate its allegations;10 that, in order to
Republic of the Philippines
get evidence to support the said case, respondents on June 13, 2005 illegally set-up
SUPREME COURT
and installed on the building of Aldo Goodyear Servitec two video surveillance
Manila
cameras facing petitioners’ property;11 that respondents, through their employees
and without the consent of petitioners, also took pictures of petitioners’ on-going
SECOND DIVISION construction;12 and that the acts of respondents violate petitioners’ right to
privacy.13 Thus, petitioners prayed that respondents be ordered to remove the
G.R. No. 179736 June 26, 2013 video surveillance cameras and enjoined from conducting illegal surveillance.14

SPOUSES BILL AND VICTORIA HING, Petitioners, In their Answer with Counterclaim,15 respondents claimed that they did not install
vs. the video surveillance cameras,16nor did they order their employees to take
ALEXANDER CHOACHUY, SR. and ALLAN CHOACHUY, Respondents. pictures of petitioners’ construction.17 They also clarified that they are not the
owners of Aldo but are mere stockholders.18
DECISION
Ruling of the Regional Trial Court
DEL CASTILLO, J.:
On October 18, 2005, the RTC issued an Order 19 granting the application for a TRO.
"The concept of liberty would be emasculated if it does not likewise compel respect The dispositive portion of the said Order reads:
for one's personality as a unique individual whose claim to privacy and non-
interference demands respect."1 WHEREFORE, the application for a Temporary Restraining Order or a Writ of
Preliminary Injunction is granted. Upon the filing and approval of a bond by
This Petition for Review on Certiorari2 under Rule 45 of the Rules of Court assails petitioners, which the Court sets at P50,000.00, let a Writ of Preliminary Injunction
the July 10, 2007 Decision3 and the September 11, 2007 Resolution4 of the Court of issue against the respondents Alexander Choachuy, Sr. and Allan Choachuy. They
Appeals (CA) in CA-G.R. CEB-SP No. 01473. are hereby directed to immediately remove the revolving camera that they installed
at the left side of their building overlooking the side of petitioners’ lot and to
Factual Antecedents transfer and operate it elsewhere at the back where petitioners’ property can no
longer be viewed within a distance of about 2-3 meters from the left corner of Aldo
Servitec, facing the road.
IT IS SO ORDERED.20
Respondents moved for a reconsideration21 but the RTC denied the same in its
Order22 dated February 6, 2006.23Thus:
WHEREFORE, the Motion for Reconsideration is hereby DENIED for lack of merit.
Issue a Writ of Preliminary Injunction in consonance with the Order dated 18
October 2005.
IT IS SO ORDERED.24
Aggrieved, respondents filed with the CA a Petition for Certiorari25 under Rule 65 of
the Rules of Court with application for a TRO and/or Writ of Preliminary Injunction.
Ruling of the Court of Appeals
On July 10, 2007, the CA issued its Decision26 granting the Petition for Certiorari.
The CA ruled that the Writ of Preliminary Injunction was issued with grave abuse of
discretion because petitioners failed to show a clear and unmistakable right to an
injunctive writ.27 The CA explained that the right to privacy of residence under
Article 26(1) of the Civil Code was not violated since the property subject of the
controversy is not used as a residence.28 The CA alsosaid that since respondents are
not the owners of the building, they could not have installed video surveillance
cameras.29 They are mere stockholders of Aldo, which has a separate juridical
personality.30 Thus, they are not the proper parties.31 The fallo reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us
GRANTING the petition filed in this case. The assailed orders dated October 18,
2005 and February 6, 2006 issued by the respondent judge are hereby ANNULLED
and SET ASIDE.
SO ORDERED.32
Issues
Hence, this recourse by petitioners arguing that:
I.
THE X X X CA COMMITTED A REVERSIBLE ERROR WHEN IT ANNULLED AND SET
ASIDE THE ORDERS OF THE RTC DATED 18 OCTOBER 2005 AND 6 FEBRUARY 2006
HOLDING THAT THEY WERE ISSUED WITH GRAVE ABUSE OF DISCRETION.
II.
THE X X X CA COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT PETITIONER
SPOUSES HING ARE NOT ENTITLED TO THE WRIT OF PRELIMINARY INJUNCTION ON
THE GROUND THAT THERE IS NO VIOLATION OF THEIR CONSTITUTIONAL AND CIVIL
RIGHT TO PRIVACY DESPITE THE FACTUAL FINDINGS OF THE RTC, WHICH
RESPONDENTS CHOACHUY FAILED TO REFUTE, THAT THE ILLEGALLY INSTALLED
SURVEILLANCE CAMERAS OF RESPONDENTS CHOACH[U]Y WOULD CAPTURE THE
PRIVATE ACTIVITIES OF PETITIONER SPOUSES HING, THEIR CHILDREN AND
EMPLOYEES.
III.
THE X X X CA COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT SINCE THE
OWNER OF THE BUILDING IS ALDO DEVELOPMENT AND RESOURCES, INC. THEN TO
SUE RESPONDENTS CHOACHUY CONSTITUTES A PURPORTEDLY UNWARRANTED
PIERCING OF THE CORPORATE VEIL.
IV.
THE X X X CA COMMITTED A REVERSIBLE ERROR WHEN IT IGNORED THE SERIOUS
FORMAL DEFICIENCIES OF BOTH THE PETITION AND THE MOTION FOR
RECONSIDERATION DATED 15 MARCH 2006 OF RESPONDENTS CHOACHUY AND
GAVE X X X THEM DUE COURSE AND CONSIDERATION.33
Essentially, the issues boil down to (1) whether there is a violation of petitioners’
right to privacy, and (2) whether respondents are the proper parties to this suit.
Petitioners’ Arguments
Petitioners insist that they are entitled to the issuance of a Writ of Preliminary
Injunction because respondents’ installation of a stationary camera directly facing
petitioners’ property and a revolving camera covering a significant portion of the
same property constitutes a violation of petitioners’ right to privacy.34 Petitioners
cite Article 26(1) of the Civil Code, which enjoins persons from prying into the
private lives of others.35 Although the said provision pertains to the privacy of
another’s residence, petitioners opine that it includes business offices, citing
Professor Arturo M. Tolentino.36 Thus, even assuming arguendo that petitioners’
property is used for business, it is still covered by the said provision. 37
As to whether respondents are the proper parties to implead in this case,
petitioners claim that respondents and Aldo are one and the same, and that
respondents only want to hide behind Aldo’s corporate fiction. 38 They point out
that if respondents are not the real owners of the building, where the video
surveillance cameras were installed, then they had no business consenting to the
ocular inspection conducted by the court.39
Respondents’ Arguments
Respondents, on the other hand, echo the ruling of the CA that petitioners cannot
invoke their right to privacy since the property involved is not used as a
residence.40 Respondents maintain that they had nothing to do with the installation
of the video surveillance cameras as these were installed by Aldo, the registered
owner of the building,41as additional security for its building.42 Hence, they were
wrongfully impleaded in this case.43
Our Ruling
The Petition is meritorious.
The right to privacy is the right to be let alone.
The right to privacy is enshrined in our Constitution44 and in our laws. It is defined
as "the right to be free from unwarranted exploitation of one’s person or from
intrusion into one’s private activities in such a way as to cause humiliation to a
person’s ordinary sensibilities."45 It is the right of an individual "to be free from
unwarranted publicity, or to live without unwarranted interference by the public in
matters in which the public is not necessarily concerned."46 Simply put, the right to
privacy is "the right to be let alone."47
The Bill of Rights guarantees the people’s right to privacy and protects them against
the State’s abuse of power. In this regard, the State recognizes the right of the
people to be secure in their houses. No one, not even the State, except "in case of
overriding social need and then only under the stringent procedural safeguards,"
can disturb them in the privacy of their homes.48
The right to privacy under Article 26(1)
of the Civil Code covers business offices
where the public are excluded
therefrom and only certain individuals
are allowed to enter.
Article 26(1) of the Civil Code, on the other hand, protects an individual’s right to
privacy and provides a legal remedy against abuses that may be committed against
him by other individuals. It states:
Art. 26. Every person shall respect the dignity, personality, privacy and peace of
mind of his neighbors and other persons. The following and similar acts, though
they may not constitute a criminal offense, shall produce a cause of action for
damages, prevention and other relief:
(1) Prying into the privacy of another’s residence;
xxxx
This provision recognizes that a man’s house is his castle, where his right to privacy
cannot be denied or even restricted by others. It includes "any act of intrusion into,
peeping or peering inquisitively into the residence of another without the consent
of the latter."49 The phrase "prying into the privacy of another’s residence,"
however, does not mean that only the residence is entitled to privacy. As elucidated
by Civil law expert Arturo M. Tolentino:
Our Code specifically mentions "prying into the privacy of another’s residence." This
does not mean, however, that only the residence is entitled to privacy, because the
law covers also "similar acts." A business office is entitled to the same privacy when
the public is excluded therefrom and only such individuals as are allowed to enter
may come in. x x x50 (Emphasis supplied)
Thus, an individual’s right to privacy under Article 26(1) of the Civil Code should not
be confined to his house or residence as it may extend to places where he has the
right to exclude the public or deny them access. The phrase "prying into the privacy
of another’s residence," therefore, covers places, locations, or even situations
which an individual considers as private. And as long as his right is recognized by
society, other individuals may not infringe on his right to privacy. The CA, therefore,
erred in limiting the application of Article 26(1) of the Civil Code only to residences.
The "reasonable expectation of
privacy" test is used to determine
whether there is a violation of the right
to privacy.
In ascertaining whether there is a violation of the right to privacy, courts use the
"reasonable expectation of privacy" test. This test determines whether a person has
a reasonable expectation of privacy and whether the expectation has been
violated.51 In Ople v. Torres,52 we enunciated that "the reasonableness of a person’s
expectation of privacy depends on a two-part test: (1) whether, by his conduct, the
individual has exhibited an expectation of privacy; and (2) this expectation is one
that society recognizes as reasonable." Customs, community norms, and practices
may, therefore, limit or extend an individual’s "reasonable expectation of
privacy."53 Hence, the reasonableness of a person’s expectation of privacy must be
determined on a case-to-case basis since it depends on the factual circumstances
surrounding the case.54
In this day and age, video surveillance cameras are installed practically everywhere
for the protection and safety of everyone. The installation of these cameras,
however, should not cover places where there is reasonable expectation of privacy,
unless the consent of the individual, whose right to privacy would be affected, was
obtained. Nor should these cameras be used to pry into the privacy of another’s
residence or business office as it would be no different from eavesdropping, which
is a crime under Republic Act No. 4200 or the Anti-Wiretapping Law.
In this case, the RTC, in granting the application for Preliminary Injunction, ruled
that:
After careful consideration, there is basis to grant the application for a temporary
restraining order. The operation by respondents of a revolving camera, even if it
were mounted on their building, violated the right of privacy of petitioners, who are
the owners of the adjacent lot. The camera does not only focus on respondents’
property or the roof of the factory at the back (Aldo Development and Resources,
Inc.) but it actually spans through a good portion of the land of petitioners.
Based on the ocular inspection, the Court understands why petitioner Hing was so
unyielding in asserting that the revolving camera was set up deliberately to monitor
the on[-]going construction in his property. The monitor showed only a portion of
the roof of the factory of Aldo. If the purpose of respondents in setting up a camera
at the back is to secure the building and factory premises, then the camera should
revolve only towards their properties at the back. Respondents’ camera cannot be
made to extend the view to petitioners’ lot. To allow the respondents to do that
over the objection of the petitioners would violate the right of petitioners as
property owners. "The owner of a thing cannot make use thereof in such a manner
as to injure the rights of a third person."55
The RTC, thus, considered that petitioners have a "reasonable expectation of
privacy" in their property, whether they use it as a business office or as a residence
and that the installation of video surveillance cameras directly facing petitioners’
property or covering a significant portion thereof, without their consent, is a clear
violation of their right to privacy. As we see then, the issuance of a preliminary
injunction was justified. We need not belabor that the issuance of a preliminary
injunction is discretionary on the part of the court taking cognizance of the case and
should not be interfered with, unless there is grave abuse of discretion committed
by the court.56 Here, there is no indication of any grave abuse of discretion. Hence,
the CA erred in finding that petitioners are not entitled to an injunctive writ.
This brings us to the next question: whether respondents are the proper parties to
this suit.
A real party defendant is one who has a
correlative legal obligation to redress a
wrong done to the plaintiff by reason of
the defendant's act or omission which
had violated the legal right of the
former.
Section 2, Rule 3 of the Rules of Court provides:
SEC. 2. Parties-in-interest. — A real party-in-interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails
of the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party-in-interest.
A real party defendant is "one who has a correlative legal obligation to redress a
wrong done to the plaintiff by reason of the defendant’s act or omission which had
violated the legal right of the former."57
In ruling that respondents are not the proper parties, the CA reasoned that since
they do not own the building, they could not have installed the video surveillance
cameras.58 Such reasoning, however, is erroneous. The fact that respondents are
not the registered owners of the building does not automatically mean that they did
not cause the installation of the video surveillance cameras.
In their Complaint, petitioners claimed that respondents installed the video
surveillance cameras in order to fish for evidence, which could be used against
petitioners in another case.59 During the hearing of the application for Preliminary
Injunction, petitioner Bill testified that when respondents installed the video
surveillance cameras, he immediately broached his concerns but they did not seem
to care,60 and thus, he reported the matter to the barangay for mediation, and
eventually, filed a Complaint against respondents before the RTC.61 He also
admitted that as early as 1998 there has already been a dispute between his family
and the Choachuy family concerning the boundaries of their respective
properties.62 With these factual circumstances in mind, we believe that respondents
are the proper parties to be impleaded.
Moreover, although Aldo has a juridical personality separate and distinct from its
stockholders, records show that it is a family-owned corporation managed by the
Choachuy family.63
Also quite telling is the fact that respondents, notwithstanding their claim that they
are not owners of the building, allowed the court to enter the compound of Aldo
and conduct an ocular inspection. The counsel for respondents even toured Judge
Marilyn Lagura-Yap inside the building and answered all her questions regarding the
set-up and installation of the video surveillance cameras.64 And when respondents
moved for reconsideration of the Order dated October 18, 2005 of the RTC, one of
the arguments they raised is that Aldo would suffer damages if the video
surveillance cameras are removed and transferred.65 Noticeably, in these instances,
the personalities of respondents and Aldo seem to merge.
All these taken together lead us to the inevitable conclusion that respondents are
merely using the corporate fiction of Aldo as a shield to protect themselves from
this suit. In view of the foregoing, we find that respondents are the proper parties
to this suit.
WHEREFORE, the Petition is hereby GRANTED. The Decision dated July 10, 2007 and
the Resolution dated September 11, 2007 of the Court of Appeals in CA-G.R. CEB-SP
No. 01473 are hereby REVERSED and SET ASIDE. The Orders dated October 18,2005
and February 6, 200[6] of Branch 28 of the Regional Trial Court of Mandaue City in
Civil Case No. MAN-5223 are hereby REINSTATED and AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 197725 July 31, 2013
MARK ANTHONY ESTEBAN (in substitution of the deceased GABRIEL O.
ESTEBAN), Petitioner,
vs.
SPOUSES RODRIGO C. MARCELO and CARMEN T. MARCELO, Respondents.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari,1 filed under Rule 45 of the
Rules of Court, assailing the decision2 dated January 17, 2011 and the
resolution3 dated July 15, 2011 of the Court of Appeals (CA) in CA G.R. SP No.
112609.
The Facts
The late Gabriel O. Esteban, substituted by his son, petitioner Mark Anthony
Esteban,4 had been in possession of a piece of land located at 702 Tiaga St.,
Barangka Drive, Mandaluyong City, since the 1950s. 5 In the 1960s, the late
Esteban's sister constructed a foundry shop at the property. In the 1970s, after the
foundry operations had proven unproductive, the respondents-spouses Rodrigo
and Carmen Marcelo were allowed to reside therein, for a monthly rental fee
of P50.00. Since March 2001, the respondents-spouses have stopped paying the
rental fee (which by that time amounted to P160.00). On October 31, 2005, the late
Esteban, through a lawyer, sent the respondents-spouses a demand letter requiring
them to settle their arrears and to vacate within five (5) days from receipt
thereof.6 For failure to comply with the demand to pay and to vacate, the late
Esteban instituted an unlawful detainer case against the respondents-spouses on
December 6, 2005.
The MeTC’s and RTC’s Rulings
In its April 23, 2009 decision,7 the Metropolitan Trial Court (MeTC) ruled that there
was a valid ground for ejectment; with the jurisdictional demand to vacate
complied with, the respondents-spouses must vacate the property, pursuant to
paragraphs 1 and 2, Article 1673 of the New Civil Code,8 on the grounds of
expiration of the lease and nonpayment of monthly rentals. The MeTC likewise
ordered the respondents-spouses to pay back rentals and rentals, plus legal interest
until they shall have vacated the property, attorney’s fees and cost of the suit. On
appeal, the Regional Trial Court (RTC) fully affirmed the MeTC ruling.9
The CA Ruling
The respondents-spouses appealed the RTC’s ruling to the CA.
In its January 17, 2011 decision,10 the CA reversed the RTC. The CA ruled that from
the year of dispossession in 2001 when the respondents-spouses stopped paying
rent, until the filing of the complaint for ejectment in 2005, more than a year had
passed; hence, the case no longer involved an accion interdictal 11 cognizable by the
MeTC, but an accion publiciana12 that should have been filed before the
RTC.13 Therefore, the MeTC had no jurisdiction over the case so that its decision
was a nullity. Likewise, the Court ruled that the respondents-spouses cannot be
evicted as they are protected by Section 6 of Presidential Decree No. (P.D.)
1517.14 Finally, the CA ruled that the respondents-spouses qualifies as beneficiary
under Section 16 of Republic Act No. (RA) 7279.15
In its July 15, 2011 resolution, the CA denied the respondents-spouses’ partial
motion for reconsideration anchored on the petitioner’s failure to effect a
substitution of parties upon the death of the late Esteban. The CA reasoned out
that mere failure to substitute a deceased party is not a sufficient ground to nullify
a trial court’s decision.16 The CA also reiterated its finding against the petitioner
that since the time of dispossession, more than one year had passed; hence, the
case was an accion publiciana that should have been commenced before the RTC.17
The Parties’ Arguments
The petitioner filed the present petition for review on certiorari to assail the CA
rulings. The petitioner argues that the case has been properly filed as an accion
interdictal cognizable by the MeTC and was filed on December 6, 2005, or within
the one-year prescriptive period counted from the date of the last demand on
October 31, 2005; hence, the MeTC had proper jurisdiction over the case.
The petitioner further argues that contrary to the CA’s findings, the failure to pay
did not render the possession unlawful; it was the failure or refusal to vacate after
demand and failure to pay that rendered the occupancy unlawful.18
The petitioner likewise points out that the respondents-spouses are not covered by
P.D. 1517 as there was no showing that the subject lot had been declared an area
for priority development or for urban land reform.
Finally, the petitioner avers that it was improper for the CA to rule that the
respondents-spouses are qualified beneficiaries under the RA 7279 as this point was
not in issue and should not have been covered by the appellate review.
In their comment to the petition,19 the respondents-spouses claim that the
substitution of petitioner was irregular as the other compulsory heirs of the late
Esteban had not been made parties to the present case.
The Court’s Ruling
The Court finds the petition meritorious.
The one-year prescription period
is counted from the last demand
to pay and vacate
As correctly pointed out by the petitioner, there should first be a demand to pay or
to comply with the terms of the lease and a demand to vacate before unlawful
detainer arises. The Revised Rules of Court clearly so state.20
Since 1947, case law has consistently upheld this rule. "Mere failure to pay rents
does not ipso facto make unlawful tenant's possession of the premises. It is the
owner's demand for tenant to vacate the premises, when the tenant has failed to
pay the rents on time, and tenant’s refusal or failure to vacate, which make
unlawful withholding of possession." In 2000, we reiterated this rule when we
declared: "It is therefore clear that before the lessor may institute such action, he
must make a demand upon the lessee to pay or comply with the conditions of the
lease and to vacate the premises. It is the owner’s demand for the tenant to vacate
the premises and the tenant’s refusal to do so which makes unlawful the
withholding of possession. Such refusal violates the owner’s right of possession
giving rise to an action for unlawful detainer."22
Furthermore, in cases where there were more than one demand to pay and vacate,
the reckoning point of one year for filing the unlawful detainer is from the last
demand as the lessor may choose to waive his cause of action and let the defaulting
lessee remain in the premises.23
P.D. 1517 does not apply: in the
absence of showing that the
subject land has been declared
and classified as an Area for
Priority Development and as a
Land Reform Zone
It was an error for the CA to rule that the respondents-spouses could not be ousted
because they were protected by P.D. 1517. This decree, in fact, does not apply to
them.
In Sps. Frilles v. Sps. Yambao,24 the Court traced the purpose, development and
coverage of P.D. 1517. The Court declared in this case that the purpose of the law is
to protect the rights of legitimate tenants who have resided for 10 years or more on
specific parcels of land situated in declared Urban Land Reform Zones or Urban
Zones, and who have built their homes thereon. These legitimate tenants have the
right not to be dispossessed and to have the right of first refusal to purchase the
property under reasonable terms and conditions to be determined by the
appropriate government agency.25
Subsequent to P.D. 1517, then President Ferdinand Marcos issued Proclamation No.
1893 on September 11, 1979, declaring the entire Metropolitan Manila area an
Urban Land Reform Zone for purposes of urban land reform. On May 14, 1980, he
issued Proclamation No. 1967, amending Proclamation No. 1893 and identifying
244 sites in Metropolitan Manila as Areas for Priority Development and Urban Land
Reform Zones. The Proclamation pointedly stated that: "the provisions of P.D. Nos.
1517, 1640 and 1642 and of LOI No. 935 shall apply only to the above-mentioned
Areas for Priority Development and Urban Land Reform Zones."
"Thus, a legitimate tenant's right of first refusal to purchase the leased property
under P.D. No. 1517 depends on whether the disputed property in Metropolitan
Manila is situated in an area specifically declared to be both an Area for Priority
Development and Urban Land Reform Zone."26
Based on the cited issuances, we find it clear that for P.D. 1517 to apply, the
tenants must have been a legitimate tenant for ten (10) years who have built their
homes on the disputed property. These circumstances do not obtain in the present
case as it was not the respondents-spouses who built their dwelling on the land; it
was the late Esteban’s sister who had the foundry shop built in the 1960s and
eventually leased the property to the respondents-spouses in the 1970s. Even
assuming that these two requirements have been complied with, P.D. 1517 still will
not apply as the issue raised in the present petition is not the right of first refusal of
the respondents-spouses, but their non-payment of rental fees and refusal to
vacate. In fact, it was their non-payment of rental fees and refusal to vacate which
caused the petitioner’s predecessor to file the action for unlawful detainer.1âwphi1
Finally, even assuming that the aforementioned circumstances were present, the
respondents-spouses still cannot qualify under P.D. 1517 in the absence of any
showing that the subject land had been declared an area for priority development
and urban land reform zone.
Issues not raised may not be
considered and ruled upon
The rule on the propriety of resolving issues not raised before the lower courts
cannot be raised on appeal: "points of law, theories, issues and arguments not
brought to the attention of the trial court will not be and ought not to be
considered by a reviewing court, as these cannot be raised for the first time on
appeal. Basic consideration of due process impels this rule." 27
As the petitioner correctly observed, the respondents-spouses never intimated,
directly or indirectly, that they were seeking the protection of RA 7279. Therefore,
the CA did not have any authority to rule that the respondents-spouses qualified as
beneficiaries under RA 7279.
Any one of the co-owners may
bring an action for ejectment
We see no merit in the respondents-spouses’ observation that the present petition
is irregular because the other compulsory heirs (or co-owners) have not been
impleaded. The present petition has been properly filed under the express provision
of Article 487 of the Civil Code.28
In the recent case of Rey Catigador Catedrilla v. Mario and Margie Lauron, 29 we
explained that while all co-owners are real parties in interest in suits to recover
properties, anyone of them may bring an action for the recovery of co-owned
properties. Only the co-owner who filed the suit for the recovery of the co-owned
property becomes an indispensable party thereto; the other co-owners are neither
indispensable nor necessary parties.
WHEREFORE, in view of the foregoing, the Court GRANTS the petition for review on
certiorari. The decision dated January 1 7, 2011 and the resolution dated July 15, 20
II of the Court of Appeals in CA-G.R. SP No. 112609 are hereby REVERSED and SET
ASIDE. The decision dated January 13, 2010 of the Regional Trial Court, Branch 211,
Mandaluyong City, in Civil Case No. 20270, is hereby REINSTATED. Costs against the
respondents spouses Rodrigo and Carmen Marcelo.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168979 December 2, 2013
REBECCA PACAÑA-CONTRERAS and ROSALIE PACAÑA, Petitioners,
vs.
ROVILA WATER SUPPLY, INC., EARL U KOKSENG, LILIA TORRES, DALLA P.
ROMANILLOS and MARISSA GABUYA, Respondents.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari1 under Rule 4 of the Rules of
Court seeking the reversal of the decision 2 dated January 27, 2005 and the
resolution3 dated June 6, 2005 of the Courts of Appeals (CA) in CA-G.R. SP No.
71551. The CA set aside the orders dated February 28, 20024 and April 1, 20025 of
the Regional Trial Court (RTC), Branch 8, Cebu City, which denied the motion to
dismiss for reconsideration respectively, of respondents Rovila Water Supply, Inc.
(Rovilla, Inc.), Earl U. Kokseng, Lialia Torres, Dalla P. Romanillos and Marissa
Gabuya.
THE FACTUAL ANTECEDENTS
Petitioners Rebecca Pacaña-Contreras and Rosalie Pacaña, children of Lourdes
Teves Pacaña and Luciano Pacaña, filed the present case against Rovila Inc., Earl,
Lilia, Dalla and Marisa for accounting and damages. 6
The petitioners claimed that their family has long been known in the community to
be engaged in the water supply business; they operated the "Rovila Water Supply"
from their family residence and were engaged in the distribution of water to
customers in Cebu City. The petitioners alleged that Lilia was a former trusted
employee in the family business who hid business records and burned and
ransacked the family files. Lilia also allegedly posted security guards and barred the
members of the Pacaña family from operating their business. She then claimed
ownership over the family business through a corporation named "Rovila Water
Supply, Inc." (Rovila Inc.) Upon inquiry with the Securities and Exchange
Commission (SEC), the petitioners claimed that Rovila Inc. was surreptitiously
formed with the respondents as the majority stockholders. The respondents did so
by conspiring with one another and forming the respondent corporation to
takeover and illegally usurp the family business’ registered name.7
In forming the respondent corporation, the respondents allegedly used the name of
Lourdes as one of the incorporators and made it appear in the SEC documents that
the family business was operated in a place other than the Pacaña residence.
Thereafter, the respondents used the Pacaña family’s receipts and the deliveries
and sales were made to appear as those of the respondent Rovila Inc. Using this
scheme, the respondents fraudulently appropriated the collections and payments. 8
The petitioners filed the complaint in their own names although Rosalie was
authorized by Lourdes through a sworn declaration and special power of attorney
(SPA). The respondents filed a first motion to dismiss on the ground that the RTC
had no jurisdiction over an intra-corporate controversy.9
The RTC denied the motion. On September 26, 2000, Lourdes died10 and the
petitioners amended their complaint, with leave of court, on October 2, 2000 to
reflect this development.11
They still attached to their amended complaint the sworn declaration with SPA, but
the caption of the amended complaint remained the same. 12
On October 10, 2000, Luciano also died.13
The respondents filed their Answer on November 16, 2000. 14
The petitioners’ sister, Lagrimas Pacaña-Gonzales, filed a motion for leave to
intervene and her answer-in-intervention was granted by the trial court. At the
subsequent pre-trial, the respondents manifested to the RTC that a substitution of
the parties was necessary in light of the deaths of Lourdes and Luciano. They
further stated that they would seek the dismissal of the complaint because the
petitioners are not the real parties in interest to prosecute the case. The pre-trial
pushed through as scheduled and the RTC directed the respondents to put into
writing their earlier manifestation. The RTC issued a pre-trial order where one of
the issues submitted was whether the complaint should be dismissed for failure to
comply with Section 2, Rule 3 of the Rules of Court which requires that every action
must be prosecuted in the name of the real party in interest.15
On January 23, 2002,16 the respondents again filed a motion to dismiss on the
grounds, among others, that the petitioners are not the real parties in interest to
institute and prosecute the case and that they have no valid cause of action against
the respondents.
THE RTC RULING
The RTC denied the respondents’ motion to dismiss. It ruled that, save for the
grounds for dismissal which may be raised at any stage of the proceedings, a
motion to dismiss based on the grounds invoked by the respondents may only be
filed within the time for, but before, the filing of their answer to the amended
complaint. Thus, even granting that the defenses invoked by the respondents are
meritorious, their motion was filed out of time as it was filed only after the
conclusion of the pre-trial conference. Furthermore, the rule on substitution of
parties only applies when the parties to the case die, which is not what happened in
the present case.17
The RTC likewise denied the respondents’ motion for reconsideration. 18
The respondents filed a petition for certiorari under Rule 65 of the Rules of Court
with the CA, invoking grave abuse of discretion in the denial of their motion to
dismiss. They argued that the deceased spouses Luciano and Lourdes, not the
petitioners, were the real parties in interest. Thus, the petitioners violated Section
16, Rule 3 of the Rules of Court on the substitution of parties. 19
Furthermore, they seasonably moved for the dismissal of the case20 and the RTC
never acquired jurisdiction over the persons of the petitioners as heirs of Lourdes
and Luciano.21
THE CA RULING
The CA granted the petition and ruled that the RTC committed grave abuse of
discretion as the petitioners filed the complaint and the amended complaint as
attorneys-in-fact of their parents. As such, they are not the real parties in interest
and cannot bring an action in their own names; thus, the complaint should be
dismissed22 pursuant to the Court’s ruling in Casimiro v. Roque and Gonzales.23
Neither are the petitioners suing as heirs of their deceased parents. Pursuant to
jurisprudence,24 the petitioners should first be declared as heirs before they can be
considered as the real parties in interest. This cannot be done in the present
ordinary civil case but in a special proceeding for that purpose. The CA agreed with
the respondents that they alleged the following issues as affirmative defenses in
their answer: 1) the petitioners are not the real parties in interest; and 2) that they
had no legal right to institute the action in behalf of their parents. 25
That the motion to dismiss was filed after the period to file an answer has lapsed is
of no moment. The RTC judge entertained it and passed upon its merit. He was
correct in doing so because in the pre-trial order, one of the submitted issues was
whether the case must be dismissed for failure to comply with the requirements of
the Rules of Court. Furthermore, in Dabuco v. Court of Appeals, 26 the Court held
that the ground of lack of cause of action may be raised in a motion to dismiss at
anytime.27
The CA further ruled that, in denying the motion to dismiss, the RTC judge acted
contrary to established rules and jurisprudence which may be questioned via a
petition for certiorari. The phrase "grave abuse of discretion" which was
traditionally confined to "capricious and whimsical exercise of judgment" has been
expanded to include any action done "contrary to the Constitution, the law or
jurisprudence[.]"28
THE PARTIES’ ARGUMENTS
The petitioners filed the present petition and argued that, first, in annulling the
interlocutory orders, the CA unjustly allowed the motion to dismiss which did not
conform to the rules.29
Specifically, the motion was not filed within the time for, but before the filing of,
the answer to the amended complaint, nor were the grounds raised in the answer.
Citing Section 1, Rule 9 of the Rules of Court, the respondents are deemed to have
waived these grounds, as correctly held by the RTC.30
Second, even if there is non-joinder and misjoinder of parties or that the suit is not
brought in the name of the real party in interest, the remedy is not outright
dismissal of the complaint, but its amendment to include the real parties in
interest.31
Third, the petitioners sued in their own right because they have actual and
substantial interest in the subject matter of the action as heirs or co-owners,
pursuant to Section 2, Rule 3 of the Rules of Court.32
Their declaration as heirs in a special proceeding is not necessary, pursuant to the
Court’s ruling in Marabilles, et al. v. Quito.33
Finally, the sworn declaration is evidentiary in nature which remains to be
appreciated after the trial is completed.34
The respondents reiterated in their comment that the petitioners are not the real
parties in interest.35
They likewise argued that they moved for the dismissal of the case during the pre-
trial conference due to the petitioners’ procedural lapse in refusing to comply with
a condition precedent, which is, to substitute the heirs as plaintiffs. Besides, an
administrator of the estates of Luciano and Lourdes has already been appointed. 36
The respondents also argued that the grounds invoked in their motion to dismiss
were timely raised, pursuant to Section 2, paragraphs g and i, Rule 18 of the Rules
of Court. Specifically, the nature and purposes of the pre-trial include, among
others, the dismissal of the action, should a valid ground therefor be found to exist;
and such other matters as may aid in the prompt disposition of the action. Finally,
the special civil action of certiorari was the proper remedy in assailing the order of
the RTC.37
THE COURT’S RULING
We find the petition meritorious.
Petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to
dismiss attended by grave abuse of discretion
In Barrazona v. RTC, Branch 61, Baguio City,38 the Court held that while an order
denying a motion to dismiss is interlocutory and non-appealable, certiorari and
prohibition are proper remedies to address an order of denial made without or in
excess of jurisdiction. The writ of certiorari is granted to keep an inferior court
within the bounds of its jurisdiction or to prevent it from committing grave abuse of
discretion amounting to lack or excess of jurisdiction.
The history and development of the ground "fails to state a cause of action" in the
1940, 1964 and the present 1997 Rules of Court Preliminarily, a suit that is not
brought in the name of the real party in interest is dismissible on the ground that
the complaint "fails to state a cause of action."39
Pursuant to jurisprudence,40 this is also the ground invoked when the respondents
alleged that the petitioners are not the real parties in interest because: 1) the
petitioners should not have filed the case in their own names, being merely
attorneys-in-fact of their mother; and 2) the petitioners should first be declared as
heirs. A review of the 1940, 1964 and the present 1997 Rules of Court shows that
the fundamentals of the ground for dismissal based on "failure to state a cause of
action" have drastically changed over time. A historical background of this
particular ground is in order to preclude any confusion or misapplication of
jurisprudence decided prior to the effectivity of the present Rules of Court. The
1940 Rules of Court provides under Section 10, Rule 9 that:
Section 10. Waiver of defenses- Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived; except the defense of
failure to state a cause of action, which may be alleged in a later pleading, if one is
permitted, or by motion for judgment on the pleadings, or at the trial on the merits;
but in the last instance, the motion shall be disposed of as provided in section 5 of
Rule 17 in the light of any evidence which may have been received. Whenever it
appears that the court has no jurisdiction over the subject-matter, it shall dismiss
the action. [underscoring supplied]
This provision was essentially reproduced in Section 2, Rule 9 of the 1964 Rules of
Court, and we quote:
Section 2. Defenses and objections not pleaded deemed waived. — Defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed
waived; except the failure to state a cause of action which may be alleged in a later
pleading, if one is permitted, or by motion for judgment on the pleadings, or at the
trial on the merits; but in the last instance, the motion shall be disposed of as
provided in section 5 of Rule 10 in the light of any evidence which may have been
received. Whenever it appears that the court has no jurisdiction over the subject-
matter, it shall dismiss the action. [underscoring supplied]
Under the present Rules of Court, this provision was reflected in Section 1, Rule 9,
and we quote:
Section 1. Defenses and objections not pleaded. — Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred
by a prior judgment or by statute of limitations, the court shall dismiss the claim.
[underscoring supplied]
Notably, in the present rules, there was a deletion of the ground of "failure to state
a cause of action" from the list of those which may be waived if not invoked either
in a motion to dismiss or in the answer. Another novelty introduced by the present
Rules, which was totally absent in its two precedents, is the addition of the period
of time within which a motion to dismiss should be filed as provided under Section
1, Rule 16 and we quote:
Section 1. Grounds. — Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made on any of
the following grounds: xxx [underscoring supplied]
All these considerations point to the legal reality that the new Rules effectively
restricted the dismissal of complaints in general, especially when what is being
invoked is the ground of "failure to state a cause of action." Thus, jurisprudence
governed by the 1940 and 1964 Rules of Court to the effect that the ground for
dismissal based on failure to state a cause of action may be raised anytime during
the proceedings, is already inapplicable to cases already governed by the present
Rules of Court which took effect on July 1, 1997. As the rule now stands, the failure
to invoke this ground in a motion to dismiss or in the answer would result in its
waiver. According to Oscar M. Herrera,41 the reason for the deletion is that failure
to state a cause of action may be cured under Section 5, Rule 10 and we quote:
Section 5. Amendment to conform to or authorize presentation of evidence. —
When issues not raised by the pleadings are tried with the express or implied
consent of the parties they shall be treated in all respects as if they had been raised
in the pleadings. Such amendment of the pleadings as may be necessary to cause
them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgment; but failure to amend does
not effect the result of the trial of these issues. If evidence is objected to at the trial
on the ground that it is not within the issues made by the pleadings, the court may
allow the pleadings to be amended and shall do so with liberality if the presentation
of the merits of the action and the ends of substantial justice will be subserved
thereby. The court may grant a continuance to enable the amendment to be made.
With this clarification, we now proceed to the substantial issues of the petition.
The motion to dismiss in the present case based on failure to state a cause of action
was not timely filed and was thus waived
Applying Rule 16 of the Rules of Court which provides for the grounds for the
dismissal of a civil case, the respondents’ grounds for dismissal fall under Section
1(g) and (j), Rule 16 of the Rules of Court, particularly, failure to state a cause of
action and failure to comply with a condition precedent (substitution of parties),
respectively. The first paragraph of Section 1,42
Rule 16 of the Rules of Court provides for the period within which to file a motion
to dismiss under the grounds enumerated. Specifically, the motion should be filed
within the time for, but before the filing of, the answer to the complaint or pleading
asserting a claim. Equally important to this provision is Section 1, 43
Rule 9 of the Rules of Court which states that defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived, except for the
following grounds: 1) the court has no jurisdiction over the subject matter; 2) litis
pendencia; 3) res judicata; and 4) prescription. Therefore, the grounds not falling
under these four exceptions may be considered as waived in the event that they are
not timely invoked. As the respondents’ motion to dismiss was based on the
grounds which should be timely invoked, material to the resolution of this case is
the period within which they were raised. Both the RTC and the CA found that the
motion to dismiss was only filed after the filing of the answer and after the pre-trial
had been concluded. Because there was no motion to dismiss before the filing of
the answer, the respondents should then have at least raised these grounds as
affirmative defenses in their answer. The RTC’s assailed orders did not touch on this
particular issue but the CA ruled that the respondents did, while the petitioners
insist that the respondents did not. In the present petition, the petitioners reiterate
that there was a blatant non-observance of the rules when the respondents did not
amend their answer to invoke the grounds for dismissal which were raised only
during the pre-trial and, subsequently, in the subject motion to dismiss.44
The divergent findings of the CA and the petitioners’ arguments are essentially
factual issues. Time and again, we have held that the jurisdiction of the Court in a
petition for review on certiorari under Rule 45, such as the present case, is limited
only to questions of law, save for certain exceptions. One of these is attendant
herein, which is, when the findings are conclusions without citation of specific
evidence on which they are based.45
In the petition filed with the CA, the respondents made a passing allegation that, as
affirmative defenses in their answer, they raised the issue that the petitioners are
not the real parties in interest.46
On the other hand, the petitioners consistently argued otherwise in their
opposition47 to the motion to dismiss, and in their comment 48 and in their
memorandum49 on the respondents’ petition before the CA. Our examination of the
records shows that the CA had no basis in its finding that the respondents alleged
the grounds as affirmative defenses in their answer. The respondents merely stated
in their petition for certiorari that they alleged the subject grounds in their answer.
However, nowhere in the petition did they support this allegation; they did not
even attach a copy of their answer to the petition. It is basic that the respondents
had the duty to prove by substantial evidence their positive assertions. Considering
that the petition for certiorari is an original and not an appellate action, the CA had
no records of the RTC’s proceedings upon which the CA could refer to in order to
validate the respondents’ claim. Clearly, other than the respondents’ bare
allegations, the CA had no basis to rule, without proof, that the respondents alleged
the grounds for dismissal as affirmative defenses in the answer. The respondents,
as the parties with the burden of proving that they timely raised their grounds for
dismissal, could have at least attached a copy of their answer to the petition. This
simple task they failed to do. That the respondents did not allege in their answer
the subject grounds is made more apparent through their argument, both in their
motion to dismiss50 and in their comment,51 that it was only during the pre-trial
stage that they verbally manifested and invited the attention of the lower court on
their grounds for dismissal. In order to justify such late invocation, they heavily
relied on Section 2(g) and (i), Rule 1852 of the Rules of Court that the nature and
purpose of the pre-trial include, among others, the propriety of dismissing the
action should there be a valid ground therefor and matters which may aid in the
prompt disposition of the action. The respondents are not correct. The rules are
clear and require no interpretation. Pursuant to Section 1, Rule 9 of the Rules of
Court, a motion to dismiss based on the grounds invoked by the respondents may
be waived if not raised in a motion to dismiss or alleged in their answer. On the
other hand, "the pre-trial is primarily intended to make certain that all issues
necessary to the disposition of a case are properly raised. The purpose is to obviate
the element of surprise, hence, the parties are expected to disclose at the pre-trial
conference all issues of law and fact which they intend to raise at the trial, except
such as may involve privileged or impeaching matter."53
The issues submitted during the pre-trial are thus the issues that would govern the
trial proper. The dismissal of the case based on the grounds invoked by the
respondents are specifically covered by Rule 16 and Rule 9 of the Rules of Court
which set a period when they should be raised; otherwise, they are deemed
waived.
The Dabuco ruling is inapplicable in the present case; the ground for dismissal
"failure to state a cause of action" distinguished from "lack of cause of action"
To justify the belated filing of the motion to dismiss, the CA reasoned out that the
ground for dismissal of "lack of cause of action" may be raised at any time during
the proceedings, pursuant to Dabuco v. Court of Appeals. 54
This is an erroneous interpretation and application of Dabuco as will be explained
below.
First, in Dabuco, the grounds for dismissal were raised as affirmative defenses in the
answer which is in stark contrast to the present case.
Second, in Dabuco, the Court distinguished between the dismissal of the complaint
for "failure to state a cause of action" and "lack of cause of action." The Court
emphasized that in a dismissal of action for lack of cause of action, "questions of
fact are involved, [therefore,] courts hesitate to declare a plaintiff as lacking in
cause of action. Such declaration is postponed until the insufficiency of cause is
apparent from a preponderance of evidence.
Usually, this is done only after the parties have been given the opportunity to
present all relevant evidence on such questions of fact."55
In fact, in Dabuco, the Court held that even the preliminary hearing on the propriety
of lifting the restraining order was declared insufficient for purposes of dismissing
the complaint for lack of cause of action. This is so because the issues of fact had
not yet been adequately ventilated at that preliminary stage. For these reasons, the
Court declared in Dabuco that the dismissal by the trial court of the complaint was
premature. In the case of Macaslang v. Zamora, 56 the Court noted that the incorrect
appreciation by both the RTC and the CA of the distinction between the dismissal of
an action, based on "failure to state a cause of action" and "lack of cause of action,"
prevented it from properly deciding the case, and we quote:
Failure to state a cause of action and lack of cause of action are really different from
each other. On the one hand, failure to state a cause of action refers to the
insufficiency of the pleading, and is a ground for dismissal under Rule 16 of the
Rules of Court. On the other hand, lack of cause [of] action refers to a situation
where the evidence does not prove the cause of action alleged in the pleading.
Justice Regalado, a recognized commentator on remedial law, has explained the
distinction: xxx What is contemplated, therefore, is a failure to state a cause of
action which is provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of
the pleading. Sec. 5 of Rule 10, which was also included as the last mode for raising
the issue to the court, refers to the situation where the evidence does not prove a
cause of action. This is, therefore, a matter of insufficiency of evidence. Failure to
state a cause of action is different from failure to prove a cause of action. The
remedy in the first is to move for dismissal of the pleading, while the remedy in the
second is to demur to the evidence, hence reference to Sec. 5 of Rule 10 has been
eliminated in this section. The procedure would consequently be to require the
pleading to state a cause of action, by timely objection to its deficiency; or, at the
trial, to file a demurrer to evidence, if such motion is warranted. [italics supplied]
Based on this discussion, the Court cannot uphold the dismissal of the present case
based on the grounds invoked by the respondents which they have waived for
failure to invoke them within the period prescribed by the Rules. The Court cannot
also dismiss the case based on "lack of cause of action" as this would require at
least a preponderance of evidence which is yet to be appreciated by the trial court.
Therefore, the RTC did not commit grave abuse of discretion in issuing the assailed
orders denying the respondents’ motion to dismiss and motion for reconsideration.
The Court shall not resolve the merits of the respondents’ grounds for dismissal
which are considered as waived.
Other heirs of the spouses Pacaña to be impleaded in the case.
It should be emphasized that insofar as the petitioners are concerned, the
respondents have waived the dismissal of the complaint based on the ground of
failure to state a cause of action because the petitioners are not the real parties in
interest. At this juncture, a distinction between a real party in interest and an
indispensable party is in order. In Carandang v. Heirs of de Guzman, et al., 57 the
Court clarified these two concepts and held that "[a] real party in interest is the
party who stands to be benefited or injured by the judgment of the suit, or the
party entitled to the avails of the suit. On the other hand, an indispensable party is
a party in interest without whom no final determination can be had of an action, in
contrast to a necessary party, which is one who is not indispensable but who ought
to be joined as a party if complete relief is to be accorded as to those already
parties, or for a complete determination or settlement of the claim subject of the
action. xxx If a suit is not brought in the name of or against the real party in interest,
a motion to dismiss may be filed on the ground that the complaint states no cause
of action. However, the dismissal on this ground entails an examination of whether
the parties presently pleaded are interested in the outcome of the litigation, and
not whether all persons interested in such outcome are actually pleaded. The latter
query is relevant in discussions concerning indispensable and necessary parties, but
not in discussions concerning real parties in interest. Both indispensable and
necessary parties are considered as real parties in interest, since both classes of
parties stand to be benefited or injured by the judgment of the suit."
At the inception of the present case, both the spouses Pacaña were not impleaded
as parties-plaintiffs. The Court notes, however, that they are indispensable parties
to the case as the alleged owners of Rovila Water Supply. Without their inclusion as
parties, there can be no final determination of the present case. They possess such
an interest in the controversy that a final decree would necessarily affect their
rights, so that the courts cannot proceed without their presence. Their interest in
the subject matter of the suit and in the relief sought is inextricably intertwined
with that of the other parties.58
Jurisprudence on the procedural consequence of the inclusion or non-inclusion of
an indispensable party is divided in our jurisdiction. Due to the non-inclusion of
indispensable parties, the Court dismissed the case in Lucman v. Malawi, et al. 59 and
Go v. Distinction Properties Development Construction, Inc.,60 while in Casals, et al.
v. Tayud Golf and Country Club et al.,61 the Court annulled the judgment which was
rendered without the inclusion of the indispensable parties. In Arcelona et al. v.
Court of Appeals62 and Bulawan v. Aquende,63 and Metropolitan Bank & Trust
Company v. Alejo et al.64 the Court ruled that the burden to implead or order the
impleading of an indispensable party rests on the plaintiff and on the trial court,
respectively. Thus, the non-inclusion of the indispensable parties, despite notice of
this infirmity, resulted in the annulment of these cases. In Plasabas, et al. v. Court of
Appeals, et al.,65 the Court held that the trial court and the CA committed reversible
error when they summarily dismissed the case, after both parties had rested their
cases following a protracted trial, on the sole ground of failure to implead
indispensable parties. Non-joinder of indispensable parties is not a ground for the
dismissal of an action. The remedy is to implead the non-party claimed to be
indispensable. However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et
al.66 and Lagunilla, et al. v. Monis, et al.,67 the Court remanded the case to the RTC
for the impleading of indispensable parties. On the other hand, in Lotte Phil. Co.,
Inc. v. Dela Cruz,68PepsiCo, Inc. v. Emerald Pizza, 69 and Valdez Tallorin, v. Heirs of
Tarona, et al.,70 the Court directly ordered that the indispensable parties be
impleaded. Mindful of the differing views of the Court as regards the legal effects of
the non-inclusion of indispensable parties, the Court clarified in Republic of the
Philippines v. Sandiganbayan, et al.,71that the failure to implead indispensable
parties is a curable error and the foreign origin of our present rules on
indispensable parties permitted this corrective measure. This cited case held:
Even in those cases where it might reasonably be argued that the failure of the
Government to implead the sequestered corporations as defendants is indeed a
procedural aberration xxx, slight reflection would nevertheless lead to the
conclusion that the defect is not fatal, but one correctible under applicable
adjective rules – e.g., Section 10, Rule 5 of the Rules of Court [specifying the remedy
of amendment during trial to authorize or to conform to the evidence]; Section 1,
Rule 20 [governing amendments before trial], in relation to the rule respecting
omission of so-called necessary or indispensable parties, set out in Section 11, Rule
3 of the Rules of Court. It is relevant in this context to advert to the old familiar
doctrines that the omission to implead such parties "is a mere technical defect
which can be cured at any stage of the proceedings even after judgment"; and that,
particularly in the case of indispensable parties, since their presence and
participation is essential to the very life of the action, for without them no
judgment may be rendered, amendments of the complaint in order to implead
them should be freely allowed, even on appeal, in fact even after rendition of
judgment by this Court, where it appears that the complaint otherwise indicates
their identity and character as such indispensable parties." Although there are
decided cases wherein the non-joinder of indispensable parties in fact led to the
dismissal of the suit or the annulment of judgment, such cases do not jibe with the
matter at hand. The better view is that non-joinder is not a ground to dismiss the
suit or annul the judgment. The rule on joinder of indispensable parties is founded
on equity. And the spirit of the law is reflected in Section 11, Rule 3 of the 1997
Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of non-
joinder or misjoinder of parties and allows the amendment of the complaint at any
stage of the proceedings, through motion or on order of the court on its own
initiative. Likewise, jurisprudence on the Federal Rules of Procedure, from which
our Section 7, Rule 3 on indispensable parties was copied, allows the joinder of
indispensable parties even after judgment has been entered if such is needed to
afford the moving party full relief. Mere delay in filing the joinder motion does not
necessarily result in the waiver of the right as long as the delay is excusable.
In Galicia, et al. v. Vda. De Mindo, et al.,72 the Court ruled that in line with its policy
of promoting a just and inexpensive disposition of a case, it allowed the
intervention of the indispensable parties instead of dismissing the complaint.
Furthermore, in Commissioner Domingo v. Scheer,73 the Court cited Salvador, et al.
v. Court of Appeals, et al.74 and held that the Court has full powers, apart from that
power and authority which are inherent, to amend the processes, pleadings,
proceedings and decisions by substituting as party-plaintiff the real party in
interest. The Court has the power to avoid delay in the disposition of this case, and
to order its amendment in order to implead an indispensable party. With these
discussions as premises, the Court is of the view that the proper remedy in the
present case is to implead the indispensable parties especially when their non-
inclusion is merely a technical defect. To do so would serve proper administration
of justice and prevent further delay and multiplicity of suits. Pursuant to Section 9,
Rule 3 of the Rules of Court, parties may be added by order of the court on motion
of the party or on its own initiative at any stage of the action. If the plaintiff refuses
to implead an indispensable party despite the order of the court, then the court
may dismiss the complaint for the plaintiff’s failure to comply with a lawful court
order.75

The operative act that would lead to the dismissal of the case would be the refusal
to comply with the directive of the court for the joinder of an indispensable party to
the case.76

Obviously, in the present case, the deceased Pacañas can no longer be included in
the complaint as indispensable parties because of their death during the pendency
of the case. Upon their death, however, their ownership and rights over their
properties were transmitted to their heirs, including herein petitioners, pursuant to
Article 77477 in relation with Article 77778 of the Civil Code.

In Orbeta, et al. v. Sendiong,79 the Court acknowledged that the heirs, whose
hereditary rights are to be affected by the case, are deemed indispensable parties
who should have been impleaded by the trial court. Therefore, to obviate further
delay in the proceedings of the present case and given the Court’s authority to
order the inclusion of an indispensable party at any stage of the proceedings, the
heirs of the spouses Pacaña, except the petirioners who are already parties to the
case are Lagrimas Pacaña-Gonzalez who intervened in the case, are hereby ordered
impleaded as parties-plaintiffs.

WHEREFORE, the petition is GRANTED. The decision dated January 27, 2005 and the
resolution date June 6, 2005 of the Court of Appeals in CA-G.R. SP No. 71551 are
REVERSED and SET ASIDE. The heirs of the spouses Luciano and Lourdes Pacaña,
except herein petitioner and Lagrimas Pacaña-Gonzalez, are ORDERED IMPLEADED
as parties plaintiffs and the RTC is directed tp proceed with the trial of the case with
DISPATCH.

SO ORDERED.