G.R. No.
L-22042 August 17, 1967 For failure to answer the complaint, Del Monte and Aguilar were declared in default.
DIONISIA, EULOGIO, MARINA, GUILLERMO and NORBERTO all surnamed
GUINGON, plaintiffs-appellees,
vs.
ILUMINADO DEL MONTE, JULIO AGUILAR and CAPITAL INSURANCE and
SURETY CO., INC., defendants.
CAPITAL INSURANCE and SURETY CO., INC., defendant-appellant.
DOCTRINE:
FACTS:
Julio Aguilar owned and operated several jeepneys in the City of Manila. He entered
into a contract with the Capital Insurance & Surety Co., Inc. insuring the operation of
his jeepneys against accidents with third-party liability. The pertinent provisions of
the insurance policy provides:
Section II —LIABILITY TO THE PUBLIC
1. The Company, will, subject to the limits of liability, indemnify the Insured
in the event of accident caused by or arising out of the use of the Motor
Vehicle/s or in connection with the loading or unloading of the Motor
Vehicle/s, against all sums including claimant's costs and expenses which
the Insured shall become legally liable to pay in respect of:
a. death of or bodily injury to any person
b. damage to property
During the effectivity of such insurance policy Iluminado del Monte, one of the drivers
of the jeepneys operated by Aguilar, while driving along the intersection, bumped
with one Gervacio Guingon who had just alighted from another jeepney and as a
consequence the latter died some days thereafter.
A corresponding information for homicide thru reckless imprudence was filed against
Iluminado del Monte, who pleaded guilty. A penalty of four months imprisonment was
imposed on him.
As a corollary to such action, the heirs of Gervacio Guingon filed an action for
damages praying that the sum of P82,771.80 be paid to them jointly and severally
by the defendants, driver Iluminado del Monte, owner and operator Julio Aguilar, and
the Capital Insurance & Surety Co., Inc.
Capital Insurance & Surety Co., Inc. answered, alleging that the plaintiff has no cause
of action against it.
Rtc Ruling:
The CIF of Manila rendered its judgment sentencing Iluminado del Monte and Julio
Aguilar jointly and severally to pay plaintiffs the sum of P8,572.95 as damages for the
death of their father, plus P1,000.00 for attorney's fees plus costs.
The defendant Capital Insurance and Surety Co., Inc. is hereby sentenced to pay the
plaintiffs the sum of Five Thousand (P5,000.00) Pesos plus Five Hundred (P500.00)
Pesos as attorney's fees and costs. These sums adjudged against Capital Insurance
and Surety Co., Inc. shall be applied in partial satisfaction of the judgment rendered
against Iluminado del Monte and Julio Aguilar in this case.
Defendant-appealant appealed the case to the CA.
Ca Ruling: The CA certified the case to SC because the appeal raises purely
questions of law.
ISSUE:
1. Plaintiffs not being parties to the insurance contract, do they have a cause
of action against the company? YES
2. The next question is on the right of the third person to sue the insurer jointly
with the insured.? YES
Appellant’s Contention:
Appellant contends that the "no action" clause in the policy closes the avenue to any
third party which may be injured in an accident wherein the jeepney of the insured
might have been the cause of the injury of third persons, alleging the freedom of
contracts.
1. Plaintiffs not being parties to the insurance contract, do they have
a cause of action against the company? YES
The Rules of Court provide that parties may be joined either as plaintiffs or
defendants, as the right to relief in respect to or arising out of the same
transactions is alleged to exist (Sec. 6, Rule 3).
The right of the person injured to sue the insurer of the party at fault (insured),
depends on whether the contract of insurance is intended to benefit third persons
also or only the insured. And the test applied has been this: Where the contract
provides for indemnity against liability to third persons, then third persons to whom
the insured is liable, can sue the insurer. Where the contract is for indemnity against
actual loss or payment, then third persons cannot proceed against the insurer, the
contract being solely to reimburse the insured for liability actually discharged by him
thru payment to third persons, said third persons' recourse being thus limited to the
insured alone.2
The policy in the present case, as aforequoted, is one whereby the insurer
agreed to indemnify the insured "against all sums . . . which the Insured
shall become legally liable to pay in respect of: a. death of or bodily injury
to any person . . . ." Clearly, therefore, it is one for indemnity against
liability;1 from the fact then that the insured is liable to the third person,
such third person is entitled to sue the insurer.
2. The next question is on the right of the third person to sue the
insurer jointly with the insured.? YES
The rule has often been announced in Texas that when two causes of action
are connected with each other, or grow out of the same transaction, they
may be properly joined, and in such suit all parties against whom the plaintiff
asserts a common or an alternative liability may be joined as defendants. .
. . Even if appellants had presented any plea in abatement as to joinder of
damages arising from a tort with those arising from a contract, it could not,
under the facts of this case, be sustained, for the rule is that a suit may
include an action for breach of contract and one for tort, provided they are
connected with each other or grew out of the same transaction.
Similarly, in the instant suit, Sec. 5 of Rule 2 on "Joinder of causes of
action" and Sec. 6 of Rule 3 on "Permissive joinder of parties" cannot be
superseded, at least with respect to third persons not a party to the
contract, as herein, by a "no action" clause in the contract of insurance.

The next question is on the right of the third person to sue the insurer jointly with
the insured. The policy requires, as afore-stated, that suit and final judgment be first
obtained against the insured; that only "thereafter" can the person injured recover
on the policy; it expressly disallows suing the insurer as a co-defendant of the insured
in a suit to determine the latter's liability. As adverted to before, the query is which
procedure to follow — that of the insurance policy or the Rules of Court.

The "no action" clause in the policy of insurance cannot prevail over the
Rules of Court provision aimed at avoiding multiplicity of suits. In a case
squarely on the point, American Automobile Ins. Co. vs. Struwe, 218 SW
534 (Texas CCA), it was held that a "no action" clause in a policy of
insurance cannot override procedural rules aimed at avoidance of
multiplicity of suits. We quote:

Appellants filed a plea in abatement on the grounds that the suit had been
prematurely brought against the insurance company, and that it had been
improperly joined with Zunker, as said insurance company, under the terms
of the policy, was only liable after judgment had been awarded against
Zunker. . . .

* * * That plea was properly overruled, because under the laws of Texas a
dual suit will always be avoided whenever all parties can have a fair trial
when joined in one suit. Appellee, had he so desired, could have prosecuted
his claim to judgment as against Zunker and then have sued on that
judgment against the insurance company, but the law does not make it
imperative that he should do so, but would permit him to dispose of the
whole matter in one suit.

American Automobile Ins. Co. v. Struwe, 218 S.W. 534 (Tex. App. 1920)
Court of Appeals of Texas
Filed: January 14th, 1920
Precedential Status: Precedential
Citations: 218 S.W. 534
Docket Number: No. 6326.
Judges: FLY, C.J.
This is a suit for damages instituted by appellee against the insurance company and
A. F. Zunker, in which it was alleged that appellee had been injured through the
negligence of Zunker in causing a collision between an automobile operated by the
latter and a motorcycle operated by appellee. The grounds of negligence were that
the automobile was operated at an illegal and dangerous rate of speed, that is, in
excess of 25 miles an hour; that the automobile was operated on the left side of the
street, in defiance of law; and that in passing the motorcycle the automobile was
moving in an opposite direction to that in which the motorcycle was moving, and
went at a higher rate of speed than 15 miles an hour. The insurance company was
sued as liable under a bond or policy of insurance which bound the company to pay
for damages incurred by the negligence of Zunker in the sum of $5,000. The cause
was submitted to a jury on special issues, and upon the responses thereto judgment
was rendered in favor of appellee as against both of the parties defendant, here as
appellants, in the sum of $4,500.
There was evidence to sustain the findings of the jury to the effect that a collision
occurred between an automobile operated by a driver for Zunker, the same being a
service car, and a motorcycle operated by appellee, and that appellee was damaged
in the sum found by the jury.
Appellants filed a plea in abatement on the grounds that the suit had been
prematurely brought against the insurance company, and that it had been improperly
joined with Zunker, as said insurance company, under the terms of the policy, was
only liable after judgment had been awarded against Zunker. On the overruling of
that plea is based the first assignment of error, which, however, seeks to add to the
plea in abatement the further ground that —
"The suit is an improper joinder of a suit for damages arising from a tort against said
A. F. Zunker with a suit upon a written contract, to wit, said contract, policy, or bond
of insurance executed by said insurance company alone."
Of course, the addition to the plea cannot be considered, even if it were meritorious,
but the plea must be considered that was presented to the trial judge. That plea was
properly overruled, because under the laws of Texas a dual suit will always be avoided
whenever all parties can have a fair trial when joined in one suit. Appellee, had he so
desired, could have prosecuted his claim to judgment as against Zunker and then
have sued on that judgment against the insurance company, but the law does not
make it imperative that he should do so, but would permit him to dispose of the whole
matter in one suit
The rule has often been announced in Texas that when two causes of action are
connected with each other, or grow out of the same transaction, they may be properly
joined, and in such suit all parties against whom the plaintiff asserts a common or an
alternative liability may be joined as defendants. Clegg v. Varnell, 18 Tex. 294; Love
v. Keowne, 58 Tex. 191; Jones v. Ford, 60 Tex. 127; National Bank v. Texas
Investment Co., 74 Tex. 421, 12 S.W. 101; Mathonican v. Scott, 87 Tex. 396,28 S.W.
1063. Even if appellants had presented any plea in abatement as to joinder of
damages arising from a tort with those arising from a contract, it could not, under
the facts of this case, be sustained, for the rule is that a suit may include an action
for breach of contract and one for tort, provided they are connected with each other
or grew out of the same transaction. Peoples v. Brockman, 153 S.W. 907. To the
same effect is Insurance Co. v. Beneke, 53 S.W. 100, and various other authorities
cited in the Peoples-Brockman Case.
Cases cited in which reference to insurance on the part of the defendant is
condemned during a trial have no applicability to a case in which misjoinder is being
urged. Those cases condemn any reference to an insurance company where it is not
joined in the suit, on the ground that it might increase the damages against the
defendant as to whom an action is being prosecuted. Under the clear provisions of
the policy in this case it operated for the benefit of any injured person, and appellee
was authorized to sue the insurance company, and the proposition that such suit
could only be maintained by a suit separate from the party who was insured and who
inflicted the injuries cannot be *Page 536 entertained under our system of judicial
procedure.
The third assignment of error complains of the action of the court in refusing to
suppress the answer of W. H. Henry to direct interrogatory No. 7, in his deposition
taken in February, 1919, which was in regard to the rate of speed at which the
automobile was moving when it collided with the motorcycle. The only statement
under the assignment is as to an answer to a cross-interrogatory propounded to the
witness, and is not in regard to the speed of the automobile, but as to whether Zunker
turned to the right or left about the time of the collision, and the record shows that
even the answer set out in the brief is not the one approved in bill of exceptions. Bill
of exceptions No. 7, referred to by appellants to sustain the assignment, has no
reference to the testimony complained of in the assignment The assignment cannot
be considered.
In assignments of error Nos. 4 and 5 complaint is made of the testimony of the
witness Henry as to the location of appellee when struck, because the witness in
former answers had testified that his view of appellee was obstructed when the
collision took place. There was no error in the action of the court. No tenable ground
of objection to the evidence was made. A deposition cannot be suppressed merely
because a witness has contradicted other statements made by him. That was a matter
that went to his credibility, and not to the competency of the evidence.
The sixth assignment of error is not followed by a statement and will not be
considered.
The eleventh assignment of error is overruled. At least a portion, if not all, of the
answer of the physician of which complaint was made was clearly admissible, and as
the motion was to suppress the whole of the answer it was not error to refuse to
strike out all of the answer. The question asked was: "Please state whether or not, in
your opinion, the injuries you have described are serious and permanent." The answer
was: "The injuries that have been described are capable of being permanent and
were quite serious." The bill of exceptions shows that the only objections urged to
the answer were that the "part of said answer which states that said injuries were
capable of being permanent was irrelevant, immaterial, and incompetent and not
sued for in this case." However, other objections are placed in the assignment which,
of course, cannot be considered. The objections made are not tenable. The answer
was not open to objections made to it. It was material and relevant and supported
by the allegations.
Upon the cross-examination of appellee by appellants he testified that he had never
collided at any time with an automobile while riding a motorcycle, and appellants
sought to prove by one Victoria Clark that she had, while riding in an automobile in
December, 1918, collided with appellee while he was on a motorcycle. The evidence
was rejected by the court. The bill of exceptions discloses that the trial judge asked
counsel for appellants on what ground he thought the evidence admissible, and he
replied "Nothing, except plaintiff testified he had never had any other accident with
his motorcycle. I don't know whether it is worth anything or not." The collision about
which evidence was sought occurred, it seems, after that one on which this action is
based, and it is stated in the brief that "The evidence sought to be elicited attacked
the memory and credibility of plaintiff." The evidence of Victoria Clark was objected
to by appellee because it had no connection with the accident and was as to a
collateral matter brought out on the cross-examination. Clearly the only object in the
testimony sought to be introduced was to impeach the witness on an immaterial and
collateral matter; immaterial because it is the rule that other acts of negligence
separate and distinct from the one connected with the action cannot be proved, and
merely collateral because it was in no way connected with the points at issue. It is
said by the Supreme Court in Railway v. Johnson, 92 Tex. 380,48 S.W. 568:
"We think the rule is well settled that, when the question is whether or not a person
has been negligent in doing or in failure to do a particular act, evidence is not
admissible to show that he has been guilty of a similar act of negligence, or even
habitually negligent upon a similar occasion."
The evidence as to a subsequent act of negligence was consequently on an immaterial
collateral matter, about which appellee could not be contradicted. As said by the Court
of Civil Appeals of the Fifth District in Railway v. Matthews, 89 S.W. 983:
"It is a well-established rule of practice that a witness cannot be contradicted upon
an immaterial matter. This is true whether the matter upon which the contradiction
is sought was elicited upon the examination in chief, without objection, or upon cross-
examination of the witness."
A case might become interminable if every immaterial collateral matter could be
followed up into its possible numerous ramifications.
It is a matter of the exercise of sound and reasonable discretion on the part of a court
to permit a witness not under the rule who has heard a portion of the testimony to
testify. In this case C. R. Santee, a witness for appellee, came into the courtroom
while the case was being tried and heard appellee testify. He then stated that he had
visited the scene of the collision shortly after it occurred and viewed the wreck and
he gave *Page 537 the position of the automobile and motorcycle, that the former
was partially on top of the latter and both were on the right-hand side of the road
going south from San Antonio. There was no question but that the car and motorcycle
were where they were placed by the witness. The driver of the automobile admitted
that he was in the middle of the road coming toward the city and that the collision
carried his automobile over to the left, which was to the right of any one going from
the city of San Antonio, and that the motorcycle was under his front wheel The
evidence of Santee could not have injured appellants, had it been inadmissible. The
court did not err in admitting the testimony.
The fourteenth assignment of error is overruled. Appellee had the legal right to testify
in rebuttal of the testimony of witnesses introduced by appellants.
The fifteenth assignment of error is without merit. The evidence disclosed that
appellee was an American soldier in the active service of the army, and of course it
was not necessary for him to take out a state license as a chauffeur. He was not a
chauffeur as defined by statute. Matthews v. State (Cr.App.) 214 S.W. 339. If he had
not been a soldier and was running a motorcycle without a license, that would not
justify the automobile driver to negligently collide with his motorcycle and injure him.
The failure to get a license had no connection with the collision and did not excuse
the negligence of appellants or mitigate their offense. Mumme v. Sutherland, 198
S.W. 395; Railway v. Vaughan's Administrator, 118 Va. 692, 88 S.E. 308, L.R.A.
1916E, 1222, Ann.Cas. 1918D, 842; Stovall v. Land Co., 189 Ala. 576, 66 So. 577;
Lindsay v. Cecchi, 3 Boyce (Del.) 133, 80 A. 523, 35 L.R.A. (N.S.) 699; Armstead v.
Lounsberry, 129 Minn. 34, 151 N.W. 542, L. R, A 1915D, 628.
The seventeenth, twenty-first, twenty-sixth, twenty-seventh, and twenty-ninth,
assignments of error assail the verdict on the ground that the preponderance of the
evidence showed that the collision occurred through a failure of appellee to have a
light on his motorcycle. He testified that he carried a light on his motorcycle, and he
was corroborated by circumstances detailed by Santee and Robinson. The jury gave
credit to that testimony, and this court has no authority to disturb their verdict based
thereon. No objection was interposed to the submission of the cause to the jury, nor
was a peremptory instruction for appellants requested. Upon what theory appellants
base an argument that the man driving Zunker's car and his chauffeur friend were
disinterested witnesses is not apparent. The fact remains, however, that the jury did
not credit their testimony, and this court has no authority to pass on the credibility of
the witnesses under the circumstances of this case.
The evidence showed that appellee was a healthy young man, physically strong and
vigorous, and that the collision caused serious concussion of the brain, fractured skull,
a broken jaw, loss of several teeth, general bruising of the body, badly injured knees,
and that the hearing in one ear was completely and permanently destroyed. A verdict
for $4,500 cannot be deemed excessive as claimed by appellants. The thirty-first and
thirty-second assignments of error are overruled.
The thirty-third assignment of error is based on the proposition of a misjoinder of
causes and parties and has been disposed of adversely to appellants in the discussion
of other assignments. The contention that the joinder of the parties caused the jury
to believe that Zunker was merely a nominal party is not borne out by the record.
There is no evidence of any passion or prejudice.
There was no question raised in the trial court as to the validity of the bond given by
the insurance company, and there is no merit in the contention made through the
thirty-fifth assignment of error that the bond was not valid because the evidence did
not show that it was accepted or approved by the city of San Antonio. The bond was
binding and valid and formed sufficient basis, with the other testimony, for the verdict
and Judgment.
The judgment is affirmed.
G.R. No. 156117 May 26, 2005
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
JEREMIAS AND DAVID HERBIETO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari, under Rule 45 of the 1997
Rules of Civil Procedure, seeking the reversal of the Decision of the Court of Appeals
in CA-G.R. CV No. 67625, dated 22 November 2002,1 which affirmed the Judgment
of the Municipal Trial Court (MTC) of Consolacion, Cebu, dated 21 December
1999,2granting the application for land registration of the respondents.
Respondents in the present Petition are the Herbieto brothers, Jeremias and David,
who filed with the MTC, on 23 September 1998, a single application for registration
of two parcels of land, Lots No. 8422 and 8423, located in Cabangahan, Consolacion,
Cebu (Subject Lots). They claimed to be owners in fee simple of the Subject Lots,
which they purchased from their parents, spouses Gregorio Herbieto and Isabel
Owatan, on 25 June 1976.3 Together with their application for registration,
respondents submitted the following set of documents:
(a) Advance Survey Plan of Lot No. 8422, in the name of respondent
Jeremias; and Advance Survey Plan of Lot No. 8423, in the name of
respondent David;4
(b) The technical descriptions of the Subject Lots;5
(c) Certifications by the Department of Environment and Natural Resources
(DENR) dispensing with the need for Surveyor's Certificates for the Subject
Lots;6
(d) Certifications by the Register of Deeds of Cebu City on the absence of
certificates of title covering the Subject Lots;7
(e) Certifications by the Community Environment and Natural Resources
Office (CENRO) of the DENR on its finding that the Subject Lots are alienable
and disposable, by virtue of Forestry Administrative Order No. 4-1063, dated
25 June 1963;8
(f) Certified True Copies of Assessment of Real Property (ARP) No.
941800301831, in the name of Jeremias, covering Lot No. 8422, issued in
1994; and ARP No. 941800301833, in the name of David, covering Lot No.
8423, also issued in 1994;9 and
(g) Deed of Definite Sale executed on 25 June 1976 by spouses Gregorio
Herbieto and Isabel Owatan selling the Subject Lots and the improvements
thereon to their sons and respondents herein, Jeremias and David,
for P1,000. Lot No. 8422 was sold to Jeremias, while Lot No. 8423 was sold
to David.10
On 11 December 1998, the petitioner Republic of the Philippines (Republic) filed an
Opposition to the respondents' application for registration of the Subject Lots arguing
that: (1) Respondents failed to comply with the period of adverse possession of the
Subject Lots required by law; (2) Respondents' muniments of title were not genuine
and did not constitute competent and sufficient evidence of bona fide acquisition of
the Subject Lots; and (3) The Subject Lots were part of the public domain belonging
to the Republic and were not subject to private appropriation.11
The MTC set the initial hearing on 03 September 1999 at 8:30 a.m. 12 All owners of
the land adjoining the Subject Lots were sent copies of the Notice of Initial
Hearing.13 A copy of the Notice was also posted on 27 July 1999 in a conspicuous
place on the Subject Lots, as well as on the bulletin board of the municipal building
of Consolacion, Cebu, where the Subject Lots were located.14 Finally, the Notice was
also published in the Official Gazette on 02 August 199915 and The Freeman Banat
News on 19 December 1999.16
During the initial hearing on 03 September 1999, the MTC issued an Order of Special
Default,17 with only petitioner Republic opposing the application for registration of the
Subject Lots. The respondents, through their counsel, proceeded to offer and mark
documentary evidence to prove jurisdictional facts. The MTC commissioned the Clerk
of Court to receive further evidence from the respondents and to submit a Report to
the MTC after 30 days.
On 21 December 1999, the MTC promulgated its Judgment ordering the registration
and confirmation of the title of respondent Jeremias over Lot No. 8422 and of
respondent David over Lot No. 8423. It subsequently issued an Order on 02 February
2000 declaring its Judgment, dated 21 December 1999, final and executory, and
directing the Administrator of the Land Registration Authority (LRA) to issue a decree
of registration for the Subject Lots.18
Petitioner Republic appealed the MTC Judgment, dated 21 December 1999, to the
Court of Appeals.19 The Court of Appeals, in its Decision, dated 22 November 2002,
affirmed the appealed MTC Judgment reasoning thus:
In the case at bar, there can be no question that the land sought to be
registered has been classified as within the alienable and disposable zone
since June 25, 1963. Article 1113 in relation to Article 1137 of the Civil Code,
 respectively provides that "All things which are within the commerce of men
are susceptible of prescription, unless otherwise provided. Property of the
State or any of its subdivisions of patrimonial character shall not be the
object of prescription" and that "Ownership and other real rights over
immovables also prescribe through uninterrupted adverse possession
thereof for thirty years, without need of title or of good faith."
As testified to by the appellees in the case at bench, their parents already
acquired the subject parcels of lands, subject matter of this application, since
1950 and that they cultivated the same and planted it with jackfruits,
bamboos, coconuts, and other trees (Judgment dated December 21, 1999,
p. 6). In short, it is undisputed that herein appellees or their predecessors-
in-interest had occupied and possessed the subject land openly,
continuously, exclusively, and adversely since 1950. Consequently, even
assuming arguendo that appellees' possession can be reckoned only from
June 25, 1963 or from the time the subject lots had been classified as within
the alienable and disposable zone, still the argument of the appellant does
not hold water.
As earlier stressed, the subject property, being alienable since 1963 as
shown by CENRO Report dated June 23, 1963, may now be the object of
prescription, thus susceptible of private ownership. By express provision of
Article 1137, appellees are, with much greater right, entitled to apply for its
registration, as provided by Section 14(4) of P.D. 1529 which allows
individuals to own land in any manner provided by law. Again, even
considering that possession of appelless should only be reckoned from 1963,
the year when CENRO declared the subject lands alienable, herein appellees
have been possessing the subject parcels of land in open, continuous, and
in the concept of an owner, for 35 years already when they filed the instant
application for registration of title to the land in 1998. As such, this court
finds no reason to disturb the finding of the court a quo.20
The Republic filed the present Petition for the review and reversal of the Decision of
the Court of Appeals, dated 22 November 2002, on the basis of the following
arguments:
First, respondents failed to establish that they and their predecessors-in-interest had
been in open, continuous, and adverse possession of the Subject Lots in the concept
of owners since 12 June 1945 or earlier. According to the petitioner Republic,
possession of the Subject Lots prior to 25 June 1963 cannot be considered in
determining compliance with the periods of possession required by law. The Subject
Lots were classified as alienable and disposable only on 25 June 1963, per CENRO's
certification. It also alleges that the Court of Appeals, in applying the 30-year
acquisitive prescription period, had overlooked the ruling in Republic v.
Doldol,21 where this Court declared that Commonwealth Act No. 141, otherwise
known as the Public Land Act, as amended and as it is presently phrased, requires
that possession of land of the public domain must be from 12 June 1945 or earlier,
for the same to be acquired through judicial confirmation of imperfect title.
Second, the application for registration suffers from fatal infirmity as the subject of
the application consisted of two parcels of land individually and separately owned by
two applicants. Petitioner Republic contends that it is implicit in the provisions of
Presidential Decree No. 1529, otherwise known as the Property Registration Decree,
as amended, that the application for registration of title to land shall be filed by a
single applicant; multiple applicants may file a single application only in case they are
co-owners. While an application may cover two parcels of land, it is allowed only
when the subject parcels of land belong to the same applicant or applicants (in case
the subject parcels of land are co-owned) and are situated within the same province.
Where the authority of the courts to proceed is conferred by a statute and when the
manner of obtaining jurisdiction is mandatory, it must be strictly complied with or the
proceedings will be utterly void. Since the respondents failed to comply with the
procedure for land registration under the Property Registration Decree, the
proceedings held before the MTC is void, as the latter did not acquire jurisdiction over
it.
I
Jurisdiction
Addressing first the issue of jurisdiction, this Court finds that the MTC had no
jurisdiction to proceed with and hear the application for registration filed by the
respondents but for reasons different from those presented by petitioner Republic.
A. The misjoinder of causes of action and parties does not affect the jurisdiction of
the MTC to hear and proceed with respondents' application for registration.
Respondents filed a single application for registration of the Subject Lots even though
they were not co-owners. Respondents Jeremias and David were actually seeking the
individual and separate registration of Lots No. 8422 and 8423, respectively.
Petitioner Republic believes that the procedural irregularity committed by the
respondents was fatal to their case, depriving the MTC of jurisdiction to proceed with
and hear their application for registration of the Subject Lots, based on this Court's
pronouncement in Director of Lands v. Court of Appeals,22 to wit:
. . . In view of these multiple omissions which constitute non-compliance
with the above-cited sections of the Act, We rule that said defects have not
invested the Court with the authority or jurisdiction to proceed with the case
because the manner or mode of obtaining jurisdiction as prescribed by the
statute which is mandatory has not been strictly followed, thereby rendering
all proceedings utterly null and void.
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.
The Property Registration Decree23 recognizes and expressly allows the following
situations: (1) the filing of a single application by several applicants for as long as
they are co-owners of the parcel of land sought to be registered;24and (2) the filing
of a single application for registration of several parcels of land provided that the
same are located within the same province.25 The Property Registration Decree is
silent, however, as to the present situation wherein two applicants filed a single
application for two parcels of land, but are seeking the separate and individual
registration of the parcels of land in their respective names.
Since the Property Registration Decree failed to provide for such a situation, then this
Court refers to the Rules of Court to determine the proper course of action. Section
34 of the Property Registration Decree itself provides that, "[t]he Rules of Court shall,
insofar as not inconsistent with the provisions of this Decree, be applicable to land
registration and cadastral cases by analogy or in a suppletory character and whenever
practicable and convenient."
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.26 They are not even accepted grounds
for dismissal thereof.27 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).
The misjoinder of causes of action and parties in the present Petition may have been
corrected by the MTC motu propio or on motion of the petitioner Republic. It is
regrettable, however, that the MTC failed to detect the misjoinder when the
application for registration was still pending before it; and more regrettable that the
petitioner Republic did not call the attention of the MTC to the fact by filing a motion
for severance of the causes of action and parties, raising the issue of misjoinder only
before this Court.
B. Respondents, however, failed to comply with the publication requirements
mandated by the Property Registration Decree, thus, the MTC was not invested with
jurisdiction as a land registration court.
Although the misjoinder of causes of action and parties in the present Petition did not
affect the jurisdiction of the MTC over the land registration proceeding, this Court,
nonetheless, has discovered a defect in the publication of the Notice of Initial Hearing,
which bars the MTC from assuming jurisdiction to hear and proceed with respondents'
application for registration.
A land registration case is a proceeding in rem,28 and jurisdiction in rem cannot be
acquired unless there be constructive seizure of the land through publication and
service of notice.29
Section 23 of the Property Registration Decree requires that the public be given Notice
of the Initial Hearing of the application for land registration by means of (1)
publication; (2) mailing; and (3) posting. Publication of the Notice of Initial Hearing
shall be made in the following manner:
1. By publication. –
Upon receipt of the order of the court setting the time for initial hearing, the
Commissioner of Land Registration shall cause a notice of initial hearing to
be published once in the Official Gazette and once in a newspaper of general
circulation in the Philippines: Provided, however, that the publication in the
Official Gazette shall be sufficient to confer jurisdiction upon the court. Said
notice shall be addressed to all persons appearing to have an interest in the
land involved including the adjoining owners so far as known, and "to all
whom it may concern." Said notice shall also require all persons concerned
to appear in court at a certain date and time to show cause why the prayer
of said application shall not be granted.
Even as this Court concedes that the aforequoted Section 23(1) of the Property
Registration Decree expressly provides that publication in the Official Gazette shall be
sufficient to confer jurisdiction upon the land registration court, it still affirms its
declaration in Director of Lands v. Court of Appeals30 that publication in a newspaper
of general circulation is mandatory for the land registration court to validly confirm
and register the title of the applicant or applicants. That Section 23 of the Property
Registration Decree enumerated and described in detail the requirements of
publication, mailing, and posting of the Notice of Initial Hearing, then all such
requirements, including publication of the Notice in a newspaper of general
circulation, is essential and imperative, and must be strictly complied with. In the
same case, this Court expounded on the reason behind the compulsory publication of
the Notice of Initial Hearing in a newspaper of general circulation, thus –
 It may be asked why publication in a newspaper of general circulation should Period of Possession
be deemed mandatory when the law already requires notice by publication
in the Official Gazette as well as by mailing and posting, all of which have Respondents failed to comply with the required period of possession of the Subject
already been complied with in the case at hand. The reason is due process Lots for the judicial confirmation or legalization of imperfect or incomplete title.
and the reality that the Official Gazette is not as widely read and circulated
as newspaper and is oftentimes delayed in its circulation, such that the
While this Court has already found that the MTC did not have jurisdiction to hear and
notices published therein may not reach the interested parties on time, if at
proceed with respondents' application for registration, this Court nevertheless deems
all. Additionally, such parties may not be owners of neighboring properties,
it necessary to resolve the legal issue on the required period of possession for
and may in fact not own any other real estate. In sum, the all
acquiring title to public land.
encompassing in rem nature of land registration cases, the consequences of
default orders issued against the whole world and the objective of
disseminating the notice in as wide a manner as possible demand a Respondents' application filed with the MTC did not state the statutory basis for their
mandatory construction of the requirements for publication, mailing and title to the Subject Lots. They only alleged therein that they obtained title to the
posting.31 Subject Lots by purchase from their parents, spouses Gregorio Herbieto and Isabel
Owatan, on 25 June 1976. Respondent Jeremias, in his testimony, claimed that his
parents had been in possession of the Subject Lots in the concept of an owner since
In the instant Petition, the initial hearing was set by the MTC, and was in fact held,
1950.32
on 03 September 1999 at 8:30 a.m. While the Notice thereof was printed in the issue
of the Official Gazette, dated 02 August 1999, and officially released on 10 August
1999, it was published in The Freeman Banat News, a daily newspaper printed in Yet, according to the DENR-CENRO Certification, submitted by respondents
Cebu City and circulated in the province and cities of Cebu and in the rest of Visayas themselves, the Subject Lots are "within Alienable and Disposable, Block I, Project
and Mindanao, only on 19 December 1999, more than three months after the initial No. 28 per LC Map No. 2545 of Consolacion, Cebu certified under Forestry
hearing. Administrative Order No. 4-1063, dated June 25, 1963. Likewise, it is outside Kotkot-
Lusaran Mananga Watershed Forest Reservation per Presidential Proclamation No.
932 dated June 29, 1992."33 The Subject Lots are thus clearly part of the public
Indubitably, such publication of the Notice, way after the date of the initial hearing,
domain, classified as alienable and disposable as of 25 June 1963.
would already be worthless and ineffective. Whoever read the Notice as it was
published in The Freeman Banat News and had a claim to the Subject Lots was
deprived of due process for it was already too late for him to appear before the MTC As already well-settled in jurisprudence, no public land can be acquired by private
on the day of the initial hearing to oppose respondents' application for registration, persons without any grant, express or implied, from the government;34 and it is
and to present his claim and evidence in support of such claim. Worse, as the Notice indispensable that the person claiming title to public land should show that his title
itself states, should the claimant-oppositor fail to appear before the MTC on the date was acquired from the State or any other mode of acquisition recognized by law.35
of initial hearing, he would be in default and would forever be barred from contesting
respondents' application for registration and even the registration decree that may The Public Land Act, as amended, governs lands of the public domain, except timber
be issued pursuant thereto. In fact, the MTC did issue an Order of Special Default on and mineral lands, friar lands, and privately-owned lands which reverted to the
03 September 1999. State.36 It explicitly enumerates the means by which public lands may be disposed,
as follows:
The late publication of the Notice of Initial Hearing in the newspaper of general
circulation is tantamount to no publication at all, having the same ultimate result. (1) For homestead settlement;
Owing to such defect in the publication of the Notice, the MTC failed to constructively
seize the Subject Lots and to acquire jurisdiction over respondents' application for
(2) By sale;
registration thereof. Therefore, the MTC Judgment, dated 21 December 1999,
ordering the registration and confirmation of the title of respondents Jeremias and
David over Lots No. 8422 and 8423, respectively; as well as the MTC Order, dated 02 (3) By lease;
February 2000, declaring its Judgment of 21 December 1999 final and executory, and
directing the LRA Administrator to issue a decree of registration for the Subject Lots, (4) By confirmation of imperfect or incomplete titles;
are both null and void for having been issued by the MTC without jurisdiction.
(a) By judicial legalization; or
II
 (b) By administrative legalization (free patent).37
Each mode of disposition is appropriately covered by separate chapters of the Public
Land Act because there are specific requirements and application procedure for every
mode.38 Since respondents herein filed their application before the MTC,39 then it can
be reasonably inferred that they are seeking the judicial confirmation or legalization
of their imperfect or incomplete title over the Subject Lots.
Judicial confirmation or legalization of imperfect or incomplete title to land, not
exceeding 144 hectares,40 may be availed of by persons identified under Section 48
of the Public Land Act, as amended by Presidential Decree No. 1073, which reads –
Section 48. The following-described citizens of the Philippines, occupying
lands of the public domain or claiming to own any such lands or an interest
therein, but whose titles have not been perfected or completed, may apply
to the Court of First Instance of the province where the land is located for
confirmation of their claims and the issuance of a certificate of title
thereafter, under the Land Registration Act, to wit:
(a) [Repealed by Presidential Decree No. 1073].
(b) Those who by themselves or through their predecessors-in-
interest have been in open, continuous, exclusive, and notorious
possession and occupation of agricultural lands of the public
domain, under a bona fide claim of acquisition of ownership, since
June 12, 1945, or earlier, immediately preceding the filing of the
applications for confirmation of title, except when prevented by war
or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and
shall be entitled to a certificate of title under the provisions of this
chapter.
(c) Members of the national cultural minorities who by themselves
or through their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of
lands of the public domain suitable to agriculture whether
disposable or not, under a bona fide claim of ownership since June
12, 1945 shall be entitled to the rights granted in subsection (b)
hereof.
Not being members of any national cultural minorities, respondents may only be
entitled to judicial confirmation or legalization of their imperfect or incomplete title
under Section 48(b) of the Public Land Act, as amended. Section 48(b), as amended,
now requires adverse possession of the land since 12 June 1945 or earlier. In the
present Petition, the Subject Lots became alienable and disposable only on 25 June
1963. Any period of possession prior to the date when the Subject Lots were classified
as alienable and disposable is inconsequential and should be excluded from the
computation of the period of possession; such possession can never ripen into
ownership and unless the land had been classified as alienable and disposable, the
rules on confirmation of imperfect title shall not apply thereto. 41 It is very apparent
then that respondents could not have complied with the period of possession required
by Section 48(b) of the Public Land Act, as amended, to acquire imperfect or
incomplete title to the Subject Lots that may be judicially confirmed or legalized.
The confirmation of respondents' title by the Court of Appeals was based on the
erroneous supposition that respondents were claiming title to the Subject Lots under
the Property Registration Decree. According to the Decision of the Court of Appeals,
dated 22 November 2002, Section 14(4) of the Property Registration Decree allows
individuals to own land in any other manner provided by law. It then ruled that the
respondents, having possessed the Subject Lots, by themselves and through their
predecessors-in-interest, since 25 June 1963 to 23 September 1998, when they filed
their application, have acquired title to the Subject Lots by extraordinary prescription
under Article 1113, in relation to Article 1137, both of the Civil Code.42
The Court of Appeals overlooked the difference between the Property Registration
Decree and the Public Land Act. Under the Property Registration Decree, there
already exists a title which is confirmed by the court; while under the Public Land Act,
the presumption always is that the land applied for pertains to the State, and that the
occupants and possessors only claim an interest in the same by virtue of their
imperfect title or continuous, open, and notorious possession.43 As established by this
Court in the preceding paragraphs, the Subject Lots respondents wish to register are
undoubtedly alienable and disposable lands of the public domain and respondents
may have acquired title thereto only under the provisions of the Public Land Act.
However, it must be clarified herein that even though respondents may acquire
imperfect or incomplete title to the Subject Lots under the Public Land Act, their
application for judicial confirmation or legalization thereof must be in accordance with
the Property Registration Decree, for Section 50 of the Public Land Act reads –
SEC. 50. Any person or persons, or their legal representatives or successors
in right, claiming any lands or interest in lands under the provisions of this
chapter, must in every case present an application to the proper Court of
First Instance, praying that the validity of the alleged title or claim be
inquired into and that a certificate of title be issued to them under the
provisions of the Land Registration Act.44
Hence, respondents' application for registration of the Subject Lots must have
complied with the substantial requirements under Section 48(b) of the Public Land
Act and the procedural requirements under the Property Registration Decree.
Moreover, provisions of the Civil Code on prescription of ownership and other real
rights apply in general to all types of land, while the Public Land Act specifically
governs lands of the public domain. Relative to one another, the Public Land Act may
be considered a special law45 that must take precedence over the Civil Code, a general
law. It is an established rule of statutory construction that between a general law and
a special law, the special law prevails – Generalia specialibus non derogant.46

WHEREFORE, based on the foregoing, the instant Petition is GRANTED. The

Decision of the Court of Appeals in CA-G.R. CV No. 67625, dated 22 November 2002,
is REVERSED. The Judgment of the MTC of Consolacion, Cebu in LRC Case No. N-75,
dated 21 December 1999, and its Order, dated 02 February 2000 are declared NULL
AND VOID. Respondents' application for registration is DISMISSED.

SO ORDERED.
G.R. No. L-10458 April 22, 1957
VICENTE MIJARES and SULPICIA GUANZON, petitioner,
vs.
HONORABLE EDMUNDO S. PICCIO, Judge of the Court of First Instance of
Cebu and PASTORA ALVAREZ GUANZON, respondents.
Luis G. Torres for petitioners.
Antonio Y. de Pio and Pedro T. Garcia for respondent Pastora A. Guanzon.
BAUTISTA ANGELO, J.:
This is a petition for prohibition and certiorari with preliminary injunction seeking to
enjoin respondent Judge from enforcing his order requiring petitioners to answer the
complaint and proceed with the trial in Civil Case No. R-3822 and asking at the same
time that said order be set aside and the case be dismissed as regards said petitioners.
On December 24, 1954, Pastora Alvarez Guanzon filed a complaint in the Court of
First Instance of Cebu against her husband Jose M. Guanzon containing two causes
of action: one for the annulment of a deed of sale in favor of Sulpicia Guanzon of
certain real properties situated in the province of Negros Occidental, and the
annulment of a deed of donation inter-vivos in favor of Joven Salvador Guanzon of
another set of real properties situated in the province of Cebu; and another for the
separation of their conjugal properties which include both real and personal acquired
during marriage (Civil Case No. R-3823).
On October 19, 1955, plaintiff filed a motion to bring into the case Sulpicia Guanzon
and her husband Vicente Mijares as parties defendants alleging that their presence
there in is indispensable. This motion was granted and said defendants were duly
summoned in accordance with law.
On January 17, 1956, new defendants Sulpicia Guanzon and Vicente Mijares, of filing
their answer, filed a motion to dismiss based on three grounds to wit: (1) that venue
is improperly laid, (2) that their is a misjoinder of cause, of action and of and (3) that
the court has no jurisdiction of said defendants. After hearing the parties on this
motion, the court denied the same on February 7, 1956, holding that the action is in
personam as it does affect title to real property, that there is no misjoinder of causes
of action, and that it has jurisdiction over the persons of the movants. The movants
filed a motion for the reconsideration, and when this was denied, they interposed the
present petition for prohibition and certiorari seeking to set aside the two orders
adverted to.
The present case involves the rule which the joinder of several causes of action, the
pertinent provision of which is embodied in Rule 2, section 5, which provides that
"Subject to rules regarding venue and joinder of parties, a party may in one complaint,
counterclaim, cross-claim and third-party claim state, in the alternative or otherwise,
as many different causes of action as he may have against an opposing party."
While this rule appears simple, however, difficulties may arise in its application, for it
does not state specifically the cases where several causes of action may be joined,
each case apparently depending upon the nature of the transactions involved. But
one thing is clear: That the joining of causes of action must be subject to the rules
regarding venue and joinder of parties. If these rules are violated, then a misjoinder
of causes of action may arise.
Former Chief Justice Moran gives several illustrations of how this rule may be applied
which are interesting. On this point he makes the following comment:
This rule, which is expressly extended to counterclaims, cross-claims, and
third-party claims, is subject to the limitation regarding venue, whereby
several causes of action with no common venue cannot be joined. For
instance, if A, a resident of Manila, has against E, a resident of Baguio, two
causes of action, one for money, and another for title to real property located
in Zamboanga, he cannot join them in a single complaint, for the venue of
the first action, which is either Manila or Baguio, is different from the venue
of the second, which is Zamboanga.
The rule is likewise subject to the limitation regarding joinder of parties. For
instance plaintiff A has a cause of action against B, another cause of action
against C, and another cause of action against D, the three causes of action
cannot be joined, because there would be a misjoinder of parties defendant,
each of them being interested in the cause of action alleged against him not
in the other causes of action pleaded against the others. 1 A claim on a
promissory note against three defendants may not be joined with a claim on
another promissory note against two of the defendants, for again there is a
misjoinder of parties, the third defendant in the first cause of action not
having an interest in the second cause of action.2(Moran, Comments on the
Rules of Court, Vol. 1, 1952 Ed., p. 24).
In the light of the instances cited by former Chief Justice Moran, it maybe stated that
there is a misjoinder of causes of action in the present case not only as regards venue
but also as regards the defendants. With regard to the first, it should be noted that
the first cause of action stated in the complaint refers to the annulment of a deed of
sale real properties situated in the province of Negros Occidental, and of a deed of
donation inter vivos of another set of real properties situated in the province of Cebu.
They refer to two different transactions which properties situated in two different
provinces. The venue has therefore been improperly laid as regards the properties in
Negros Occidental. With regard to the second, it also appears that the deed sale
which is sought to be annulled was made in favor of Sulpicia Guanzon whereas the
deed of donation was made in favor of Joven Salvador Guanzon, and there is nothing
from which it maybe inferred that the two defendants have a common interest that
maybe joined in one cause of action on the contrary their interest is distinct and
separate. They cannot therefore be joined in one cause of action.

In the light of the above considerations, it may be stated that the motion to dismiss
filed by petitioners in so far as the cause of action involving the annulment of the
deed of sale covering the properties in Negros Occidental is well taken and should
have by the lower court.

Petition is granted. The orders of respondent Judge dated February 7, 1956, and
March 5, 1956 are hereby set aside. The complaint in so far as the cause of action
affecting petitioners is hereby dismissed, leaving the complaint valid as regards the
other defendants, with costs against respondent Pastora Alvarez Guanzon.

Bengzon, Padilla, Montemayor, Concepcion, Reyes, J. B. L., Endencia and Felix,

JJ., concur.
FIRST DIVISION
On June 29, 1994, respondent Ortigas & Company Limited Partnership (Ortigas)
G.R. No. 202947, December 09, 2015 entered into a Deed of Sale with Amethyst Pearl Corporation (Amethyst) involving the
parcel of land with an area of 1,012 square meters situated in Barrio Oranbo, Pasig
City and registered under Transfer Certificate of Title (TCT) No. 65118 of the Register
ASB REALTY CORPORATION, Petitioner, v. ORTIGAS & COMPANY LIMITED
of Deeds of Rizal4 for the consideration of P2,024,000.00. The Deed of
PARTNERSHIP, Respondent.
Sale5 contained the following stipulations, among others:
COVENANTS, CONDITIONS AND RESTRICTIONS
DECISION
This lot has been segregated by ORTIGAS from its subdivisions to form part of a
BERSAMIN, J.: zonified BUILDING AREA pursuant to its controlled real estate development project
and subdivision scheme, and is subject to the following covenants which form part of
the consideration of ORTIGAS' sale to VENDEE and its assigns,
This appeal seeks the review and reversal of the amended decision promulgated on
namely:chanRoblesvirtualLawlibrary
January 9, 2012,1whereby the Court of Appeals (CA) disposed
thusly:chanRoblesvirtualLawlibrary
x x x x
WHEREFORE, premises considered, judgment is
B. BUILDING WORKS AND ARCHITECTURE:
rendered:chanRoblesvirtualLawlibrary
1. The building to be constructed on the lot shall be of reinforced concrete, cement
1. Granting the appeal of plaintiff-appellant and herein movant Ortigas and Company
hollow blocks and other high-quality materials and shall be of the following height of
Limited Partnership, and reversing the Decision of the court a quo dated December
not more than: fourteen (14) storeys plus one penthouse.
14, 2009;
x x x x
2. Rescinding the June 24, 1994 Deed of Sale between Ortigas and Company Limited
Partnership and Amethyst Pearl Corporation in view of the material breached (sic)
L. SUBMISSION OF PLANS:
thereof by AMETHYST;
The final plans and specifications of the said building shall be submitted to ORTIGAS
3. Ordering ASB Realty Corporation, by way of mutual restitution, the
for approval not later than six (6) months from date hereof. Should ORTIGAS object
RECONVEYANCE to ORTIGAS of the subject property covered by TCT No. PT-105797
to the same, it shall notify and specify to the VENDEE in writing the amendments
upon payment by ORTIGAS to ASB of the amount of Two Million Twenty Four
required to conform with its building restrictions and VENDEE shall submit the
Thousand Pesos (PhP 2,024,000.00) plus legal interest at the rate of 6% per annum
amended plans within sixty (60) days from receipt of said notice.
from the time of the finality of this judgment until the same shall have been fully
paid; and
M. CONSTRUCTION AND COMPLETION OF BUILDING:
4. Ordering the Register of Deeds of Pasig City to cancel TCT No. PT-105797 and
The VENDEE shall finish construction of its building within four (4) years from
issue a new title over the subject property under the name of ORTIGAS & COMPANY
December 31, 1991.6ChanRoblesVirtualawlibrary
LIMITED PARTNERSHIP.
As a result, the Register of Deeds of Rizal cancelled TCT No. 65118 and issued TCT
No pronouncement as to cost. No. PT-94175 in the name of Amethyst.7 The conditions contained in the Deed of
Sale were also annotated on TCT No. PT-94175 as encumbrances.8
SO ORDERED.2
On December 28, 1996, Amethyst assigned the subject property to its sole
The petitioner also assails the resolution promulgated on July 26, 2012,3 whereby the stockholder, petitioner ASB Realty Corporation (the petitioner), under a so-
CA denied its Motion for Reconsideration. called Deed of Assignment in Liquidation in consideration of 10,000 shares of the
petitioner's outstanding capital stock.9 Thus, the property was transferred to the
Antecedents petitioner free from any liens or encumbrances except those duly annotated on TCT
No. PT-94175.10 The Register of Deeds of Rizal cancelled TCT No. PT-94175 and
issued TCT No. PT-105797 in the name of the petitioner with the same encumbrances
annotated on TCT No. PT-94175.11
It is worth mentioning that the restrictions annotated in TCT No. 94175 (in the name
On July 7, 2000, Ortigas filed its complaint for specific performance against the of Amethyst Pearl Corporation) and TCT No. PT-105797 (in the name of ASB)
petitioner,12 which was docketed as Civil Case No. 67978 of the Regional Trial Court repeatedly and consistently refer to the VENDEE. The term VENDEE in the said
(RTC) in Pasig City.13 Ortigas amended the complaint, and alleged,14 among others, restrictions obviously refer to Amethyst Pearls Corporation considering the fact that
that: the date referred to in Paragraph N thereof (Construction and Completion of Building),
5. Defendant has violated the terms of the Deed of Absolute Sale (Annex "A") in the which is four (4) years from December 31, 1991, obviously refer to the plaintiffs
following manner: VENDEE Amethyst Pearl Corporation. Definitely, it cannot refer to the defendant ASB
a. While the lot may be used only "for office and residential purposes", defendant which is not a vendee of the plaintiff. Therefore, all references to VENDEE in the
introduced constructions on the property which are commercial in nature, like restrictions evidently refer to Amethyst Pearl Corporation, the VENDEE in the sale
restaurants, retail stores and the like (see par. A, Deed of Absolute Sale, Annex "A"). from the plaintiff. Such explanation is more consistent with logic than the plaintiffs
convoluted assertions that the said restrictions apply to the defendant ASB.
b. The commercial structures constructed by defendant on the property extend up to
the boundary lines of the lot in question violating the setbacks established in the Reconveyance of the property to Ortigas necessarily implies rescission of the sale or
contract (see par. B.A., ibid). transfer from Amethyst to ASB and from Ortigas to Amethyst. But Amethyst was not
made a party to the case. Reconveyance of the property to the original seller (Ortigas)
c. Defendant likewise failed to submit the final plans and specifications of its proposed applies only on the sale to the original vendee (Amethyst) and not to subsequent
building not later than six (6) months from June 29, 1994 and to complete vendees to whom the property was sold (Ayala Corp. v. Rosa Diana Realty and Dev.
construction of the same within four (4) years from December 31, 1991. (see pars. L Corp., G.R. No. 134284, Dec. 1, 2000, 346 SCRA 663).
and M, ibid).
The non-compliance by the plaintiff with the requisites of its own restrictions further
d. Being situated in a first-class office building area, it was agreed that no proves that it had no intention whatsoever to enforce or implement the same. If at
advertisements or any kind of commercial signs shall be allowed on the lot or the all, this evinces an afterthought of the plaintiff to belatedly and unjustifiably single
improvements therein but this was violated by defendant when it put up commercial out the defendant for alleged non compliance of the said restrictions which are not
signs and advertisements all over the area, (see par. F, ibid). applicable to it anyway.
6. Any of the afore-described violations committed by the defendant empower the
WHEREFORE, foregoing premises considered, the present complaint is
plaintiff to sue under parangraph "N. Unilateral Cancellation", plaintiff may have the
hereby dismissedfor lack of basis.
Deed of Absolute Sale (Annex "A") cancelled and the property reverted to it by paying
the defendant the amount it has paid less the items indicated
SO ORDERED.19ChanRoblesVirtualawlibrary
therein.15ChanRoblesVirtualawlibrary
Ortigas appealed to the CA, which initially affirmed the RTC under the decision
For reliefs, Ortigas prayed for the reconveyance of the subject property, or,
promulgated on September 6, 2011,20 ruling thusly:
alternatively, for the demolition of the structures and improvements thereon, plus the
x x x x ORTIGAS can no longer enforce the said restrictions as against ASB.
payment of penalties, attorney's fees and costs of suit. 16
The "Covenants, Conditions and Restrictions" of ORTIGAS with respect to the
During the pendency of the proceedings in the RTC, the petitioner amended its
property clearly states the following purpose:
Articles of Incorporation to change its name to St. Francis Square Realty
"This lot has been segregated by ORTIGAS from its subdivisions to form part of a
Corporation.17
zonified BUILDING AREA pursuant to its controlled real estate development project
and subdivision scheme. x x x"
After trial on the merits, the RTC rendered its decision on December 14, 2009,18 and
dismissed the complaint, pertinently holding as follows: However, it appears from the circumstances obtaining in this case that ORTIGAS
Ortigas sold the property [to] Amethyst on 29 June 1994. Amethyst was supposed to failed to pursue the aforequoted purpose. It never filed a complaint against its
finish construction on 31 December 1995. Yet, up to the time the property was vendee, AMETHYST, notwithstanding that it required the latter to complete
transferred to ASB on 28 December 1996, Ortigas never initiated any action against construction of the building within four (4) years from the execution of the Deed of
Amethyst to enforce said provision. Ortigas is therefore guilty of laches or Sale. Neither did it make a demand to enforce the subject restriction. Moreover, while
negligence or omission to assert a right within a reasonable time, warranting a it imposed a restriction on the registration and issuance of title in the name of the
presumption that the party entitled to assert it either has abandoned it or declined to vendee under Paragraph "P" on "Registration of Sale", to
assert it. (Tijam v. Sibonghanoy, L-21450, 15 April 1968, 23 SCRA 29). wit:chanRoblesvirtualLawlibrary
 In this case, ORTIGAS acquiesced to the conveyance of the property from AMETHYST
"P. REGISTRATION OF SALE: to ASB with nary a demand, reservation or complaint for the enforcement of the
restriction on building construction. It allowed the four-year period within which to
The VENDEE hereby agrees that, for the time being, this Deed will not be registered construct a building to lapse before it decided that it wanted, after all, to enforce the
and that its title shall not be issued until the satisfactory construction of the restriction, which cannot be allowed lest the property rights of the registered owner,
contemplated Office Building and VENDEE's compliance with all conditions therein. x ASB, be transgressed. Such a silence or inaction, which in effect led ASB to believe
x x" that ORTIGAS no longer sought the enforcement of the restrictions on the contract,
therefore bars ORTIGAS from enforcing the restriction it imposed on the subject
AMETHYST was nonetheless able to procure the title to the property in its name, and property.
subsequently, assigned the same to ASB.
x x x x
Besides, records show that there are registered owner-corporations of several
properties within the Ortigas area, where the subject property is located, that have WHEREFORE, premises considered, the instant appeal is DENIED. The assailed
likewise failed to comply with the restriction on building construction notwithstanding Decision is hereby AFFIRMED.
the fact of its annotation on the titles covering their properties. In fact, the tax
declarations covering these properties in the respective names of UNIMART INC., SO ORDERED.21ChanRoblesVirtualawlibrary
CHAILEASE DEVELOPMENT CO. INC., CANOGA PARK DEVELOPMENT CORPORATION,
Acting on Ortigas' Motion for Reconsideration, however, the CA promulgated its
and MAKATI SUPERMARKET CORPORATION reveal that no improvements or buildings
assailed amended decision on January 9, 2012, 22 whereby it reversed the decision
have been erected thereon.
promulgated on September 6, 2011. It observed and ruled as follows:
It is not disputed that AMETHYST failed to finish construction within the period stated
Notwithstanding such blatant non-compliance, however, records are bereft of
in the 1994 Deed of Sale. As correctly pointed out by ORTIGAS, in accordance with
evidence to prove that ORTIGAS took steps to demand observance of the said
Article 1144 of the Civil Code, the prescriptive period within which to enforce remedies
restriction from these corporations, or that it opted to institute any case against them
under the 1994 Deed of sale is ten (10) years from the time the right of action
in order to enforce its rights as seller. Thus, while ORTIGAS effectively tolerated the
accrues.
non-compliance of these other corporations, it nonetheless proceeded with the filing
of the Complaint a quo against ASB, seeking the rescission of the original Deed of
ORTIGAS, therefore, had ten (10) years from 31 December 1995 or until 31 December
Sale on the ground of non-compliance of the very same restriction being violated by
2005 within which to file suit to enforce the restriction. ORTIGAS filed the present
other property owners similarly situated.
complaint on 07 July 2000 well within the prescriptive period for filing the
same.
On the basis of the foregoing acts or omissions of ORTIGAS, and the factual milieu
of the present case, it cannot be pretended that it failed to actively pursue the
ASB contends that it could not have complied with the particular restriction to finish
attainment of its objective of having a "controlled real estate development project
construction of the building as the period to finish the same had already lapsed by
and subdivision scheme". The Court thus concurs with the ratiocinations of the RTC
the time ASB acquired the property by way of a Deed of Assignment in Liquidation
when it posited that the restrictions imposed by ORTIGAS on ASB have been
between AMETHYST and ASB on 28 December 1996. We hold, however, that the
"rendered obsolete and inexistent" for failure of ORTIGAS to enforce the
mere assignment or transfer of the subject property from AMETHYST to
same uniformly and indiscriminately against all non-complying property owners. If
ASB does not serve to defeat the vested right of ORTIGAS to avail of
the purpose of ORTIGAS for imposing the restrictions was for its "controlled real
remedies to enforce the subject restriction within the applicable
estate development project and subdivision scheme", then it should have sought
prescriptive period.
compliance from all property owners that have violated the restriction on building
completion. As things stand, ASB would appear to have been singled out by ORTIGAS,
x x x x
rendering the present action highly suspect and a mere afterthought.
As to the argument that the inaction of ORTIGAS with respect to other non-compliant
Consequently, while it may be true that ASB was bound by the restrictions annotated
properties in the Ortigas area is tantamount to consenting to such non-compliance,
on its title, specifically the restriction on building completion, ORTIGAS is now
it must be mentioned that it is the sole prerogative and discretion of Ortigas to initiate
effectively estopped from enforcing the same by virtue of its inaction and silence.
any action against the violators of the deed restrictions. This Court cannot interfere
with the exercise of such prerogative/discretion. Furthermore, We cannot sustain
x x x x
estoppel in doubtful inference. Absent the conclusive proof that its essential elements
are present, estoppel must fail. Estoppel, when misapplied, becomes an effective
weapon to accomplish an injustice, inasmuch as it shuts a man's mouth from speaking received the copy of the amended decision only on January 18, 2012, not January
the truth.23ChanRoblesVirtualawlibrary 12, 2012 as stated in the registry return card on record. Thus, it had until February
2, 2012, or 15 days from January 18, 2012, within which to file the same. In contrast,
By its resolution promulgated on July 26, 2012, the CA denied the petitioner's Motion
Ortigas relied only on the copy of the registry return to refute the petitioner's
for Reconsideration24 for being filed out of time.25cralawred
assertion.31 Under the circumstances, the filing on January 30, 2012 of the Motion for
Reconsideration was timely.
Issues
2.
Hence, this appeal in which ASB submits: (1) that its Motion for Reconsideration vis-
a-vis the CA's amended decision was filed on time; and (2) that the amended decision
Ortigas' action for rescission could not prosper
promulgated on January 9, 2012 by CA be reversed and set aside, and the decision
promulgated on September 6, 2011 be reinstated.26
The petitioner reiterates that although the restrictions and covenants imposed by
Ortigas under the Deed of Sale with Amethyst, particularly with regard to the
The petitioner essentially seeks the resolution of the issue of whether or not Ortigas
construction of the building, were similarly imposed on Ortigas' other buyers and
validly rescinded the Deed of Sale due to the failure of Amethyst and its assignee, the
annotated on the latter's respective certificates of title,32 Ortigas never took to task
petitioner, to fulfil the covenants under the Deed of Sale.
such other buyers and Amethyst for failing to construct the buildings within the
periods contractually imposed.33 It maintains, therefore, that Ortigas slept on its
Ruling of the Court
rights because it did not take any action against Amethyst during the period
prescribed in the Deed of Sale.34 It argues that even assuming that it was bound by
The petition for review is meritorious.
the terms of the Deed of Sale, certain circumstances occurred in the interim that
rendered it impossible for the petitioner to comply with the covenants embodied in
1. the Deed of Sale, namely: (1) the delay in the petitioner's possession of the property
resulted from the complaint for forcible entry it had filed in the Metropolitan Trial
Petitioner's motion for reconsideration vis-a-vis the amended decision of Court in Pasig City; (2) at the time the property was transferred to the petitioner, the
the CA was timely filed period within which to construct the building had already expired without Ortigas
enforcing the obligation against Amethyst; and (3) the petitioner was placed under
In denying the petitioner's Motion for Reconsideration, the CA concluded as follows: corporate rehabilitation by the Securities and Exchange Commission (SEC) by virtue
Per allegation of material dates, the Motion for Reconsideration filed by Balgos of which a stay order was issued on May 4, 2000. 35
Gumara & Jalandoni, co-counsel with Jose, Mendoza & Associates, on January 30,
2012 appears to have been filed on time. However, per registry return attached at In contrast, Ortigas contends that it had the sole discretion whether or not to
the back of p. 212 of the Rollo, the Motion for Reconsideration was filed three (3) commence any action against a party who violated a restriction in the Deed of
days late considering that the Amended Decision was received by defendant Sale;36 and that it could not be estopped because the Deed of Sale with Amethyst
appellee's counsel of record, Jose, Mendoza & Associates, on January 12, and the deeds of sale with its other buyers contained a uniform provision to the effect
2012.27ChanRoblesVirtualawlibrary that "any inaction, delay or tolerance by OCLP (Ortigas) in respect to violation of any
The conclusion of the CA was unwarranted because the petitioner established that its of the covenants and restrictions committed by these buyers shall not bar or estop
filing of the Motion for Reconsideration was timely. the institution of an action to enforce them."37

It is basic that the party who asserts a fact or the affirmative of an issue has the In asserting its right to rescind, Ortigas insists that the petitioner was bound by the
burden of proving it.28Here, that party was the petitioner. To comply with its burden, covenants of the Deed of Sale annotated on TCT No. PT-10597 in the name of the
it attached to its petition for review on certiorari: (1) the affidavit executed by Noel petitioner;38 and that the petitioner's privity to the Deed of Sale was by virtue of its
S.R. Rose, Senior Partner of Jose, Mendoza & Associates attesting that he had being the successor-in-interest or assignee of Amethyst.39
requested the postmaster of the Mandaluyong City Post Office to certify the date
when Jose, Mendoza & Associates had received the copy of the amended decision of After evaluating the parties' arguments and the records of the case, the Court holds
the CA;29 and (2) the certification issued on August 15, 2012 by Postmaster Rufino C. that Ortigas could not validly demand the reconveyance of the property, or the
Robles, and Letter Carrier, Jojo Salvador, both of the Mandaluyong Central Post demolition of the structures thereon through rescission.
Office, certifying that Registered Letter No. MVC 457 containing the copy of the
amended decision had been delivered to and received on January 18, 2012 by Jose, The Deed of Assignment in Liquidation executed between Amethyst and the
Mendoza & Associates, through Ric Ancheta.30 It thereby sought to prove that it had petitioner expressly stated, in part, that:
x x x x [T]he ASSIGNOR hereby assigns, transfers and conveys unto the
ASSIGNEE, its successors and assigns, free from any lien or encumbrance except
those that are duly annotated on the Transfer Certificate of Title (TCT), one parcel
of real property (with improvements). x x x.
x x x x
The ASSIGNEE in turn in consideration of the foregoing assignment of assets to it,
hereby surrenders to ASSIGNOR, Amethyst Pearl Corporation, Stock Certificate Nos.
(006, 007, 008, 009, 010, 011), covering a total of TEN THOUSAND SHARES (10,000)
registered in the name of the ASSIGNEE and its nominees in the books of ASSIGNOR,
receipt of which is hereby acknowledged, and in addition hereby releases ASSIGNOR
from any and all claims.40ChanRoblesVirtualawlibrary
The express terms of the Deed of Assignment in Liquidation, supra, indicate that
Amethyst transferred to the petitioner only the tangible asset consisting of the parcel
of land covered by TCT No. PT-94175 registered in the name of Amethyst. By no
means did Amethyst assign the rights or duties it had assumed under the Deed of
Sale. The petitioner thus became vested with the ownership of the parcel of land
"free from any lien or encumbrance except those that are duly annotated on the
[title]" from the time Amethyst executed the Deed of Assignment in Liquidation.
Although the Deed of Sale stipulated that:
3. The lot, together with any improvements thereon, or any rights thereto, shall not
be transferred, sold or encumbered before the final completion of the building as
herein provided unless it is with the prior express written approval of ORTIGAS. 41
x x x x
The VENDEE hereby agrees that, for the time being, this Deed will not be registered
and that its title shall not be issued until the satisfactory construction of the
contemplated Office Building and VENDEE's compliance with all conditions herein. x
x x42ChanRoblesVirtualawlibrary
Ortigas apparently recognized without any reservation the issuance of the new
certificate of title in the name of Amethyst and the subsequent transfer by assignment
from Amethyst to the petitioner that resulted in the issuance of the new certificate of
title under the name of the petitioner. As such, Ortigas was estopped from assailing
the petitioner's acquisition and ownership of the property.
The application of estoppel was appropriate. The doctrine of estoppel was based on
public policy, fair dealing, good faith and justice, and its purpose was to forbid a party
to speak against his own act or omission, representation, or commitment to the injury
of another to whom the act, omission, representation, or commitment was directed
and who reasonably relied thereon. The doctrine sprang from equitable principles and
the equities in the case, and was designed to aid the law in the administration of
justice where without its aid injustice would result. Estoppel has been applied by the
Court wherever and whenever special circumstances of the case so demanded. 43
Yet, the query that persists is whether or not the covenants annotated on TCT No.
PT-10597 bound the petitioner to the performance of the obligations assumed by
Amethyst under the Deed of Sale.
We agree with Ortigas that the annotations on TCT No. PT-10597 bound the petitioner
but not to the extent that rendered the petitioner liable for the non-performance of
the covenants stipulated in the Deed of Sale.
Section 39 of Act No. 496 (The Land Registration Act) requires that every person
receiving a certificate of title in pursuance of a decree of registration, and every
subsequent purchaser of registered land who takes a certificate of title for value in
good faith shall hold the same free of all encumbrances except those noted on said
certificate. An encumbrance in the context of the provision is "anything that impairs
the use or transfer of property; anything which constitutes a burden on the title; a
burden or charge upon property; a claim or lien upon property."44 It denotes "any
right to, or interest in, land which may subsist in another to the diminution of its
value, but consistent with the passing of the fee by conveyance."45 An annotation, on
the other hand, is "a remark, note, case summary, or commentary on some passage
of a book, statutory provision, court decision, of the like, intended to illustrate or
explain its meaning."46 The purpose of the annotation is to charge the purchaser or
title holder with notice of such burden and claims.47 Being aware of the annotation,
the purchaser must face the possibility that the title or the real property could be
subject to the rights of third parties.48
By acquiring the parcel of land with notice of the covenants contained in the Deed of
Sale between the vendor (Ortigas) and the vendee (Amethyst), the petitioner bound
itself to acknowledge and respect the encumbrance. Even so, the petitioner did not
step into the shoes of Amethyst as a party in the Deed of Sale. Thus, the annotation
of the covenants contained in the Deed of Sale did not give rise to a liability on the
part of the petitioner as the purchaser/successor-in-interest without its express
assumption of the duties or obligations subject of the annotation. As stated, the
annotation was only the notice to the purchaser/successor-in-interest of the burden,
claim or lien subject of the annotation. In that respect, the Court has observed
in Garcia v. Villar:49
The sale or transfer of the mortgaged property cannot affect or release the mortgage;
thus the purchaser or transferee is necessarily bound to acknowledge and respect the
encumbrance.
x x x x
x x x However, Villar, in buying the subject property with notice that it was
mortgaged, only undertook to pay such mortgage or allow the subject property to be
sold upon failure of the mortgage creditor to obtain payment from the principal debtor
once the debt matures. Villar did not obligate herself to replace the debtor in the
principal obligation, and could not do so in law without the creditors consent. Article
1293 of the Civil Code provides:
Art. 1293. Novation which consists in substituting a new debtor in the place of the
original one, may be made even without the knowledge or against the will of the
latter, but not without the consent of the creditor. Payment by the new debtor gives entered into a personal and binding contract with the assignor or with the vendor to
him the rights mentioned in articles 1236 and 1237. assume the obligations of the assignor.51ChanRoblesVirtualawlibrary
Therefore, the obligation to pay the mortgage indebtedness remains with the original Is rescission the proper remedy for Ortigas to recover the subject property from the
debtors Galas and Pingol. x x x petitioner?
To be clear, contractual obligations, unlike contractual rights or benefits, are generally
The Civil Code uses rescission in two different contexts, namely: (1) rescission on
not assignable. But there are recognized means by which obligations may be
account of breach of contract under Article 1191; and (2) rescission by reason of
transferred, such as by sub-contract and novation. In this case, the substitution of
lesion or economic prejudice under Article 1381. Cogently explaining the differences
the petitioner in the place of Amethyst did not result in the novation of the Deed of
between the contexts of rescission in his concurring opinion in Universal Food Corp.
Sale. To start with, it does not appear from the records that the consent of Ortigas
v. Court of Appeals,52 the eminent Justice J.B.L. Reyes observed:
to the substitution had been obtained despite its essentiality to the novation.
x x x The rescission on account of breach of stipulations is not predicated on injury
Secondly, the petitioner did not expressly assume Amethyst's obligations under
to economic interests of the party plaintiff but on the breach of faith by the defendant,
the Deed of Sale, whether through the Deed of Assignment in Liquidation or another
that violates the reciprocity between the parties. It is not a subsidiary action, and
document. And, thirdly, the consent of the new obligor (i.e., the petitioner), which
Article 1191 may be scanned without disclosing anywhere that the action for
was as essential to the novation as that of the obligee ( i.e., Ortigas), was not
rescission thereunder is subordinated to anything; other than the culpable breach of
obtained.50
his obligations by the defendant. This rescission is in principal action retaliatory in
character, it being unjust that a party be held bound to fulfill his promises when the
Even if we would regard the petitioner as the assignee of Amethyst as far as the Deed
other violates his, as expressed in the old Latin aphorism: "Non servanti fidem, non
of Sale was concerned, instead of being the buyer only of the subject property, there
est fides servanda." Hence, the reparation of damages for the breach is purely
would still be no express or implied indication that the petitioner had assumed
secondary.
Amethyst's obligations. In short, the burden to perform the covenants under the Deed
of Sale, or the liability for the non-performance thereof, remained with Amethyst. As
On the contrary, in the rescission by reason of lesion or economic prejudice, the cause
held in an American case:
of action is subordinated to the existence of that prejudice, because it is the raison
The mere assignment of a bilateral executory contract may not be interpreted as a
d'etre as well as the measure of the right to rescind. Hence, where the defendant
promise by the assignee to the assignor to assume the performance of the assignor's
makes good the damages caused, the action cannot be maintained or continued, as
duties, so as to have the effect of creating a new liability on the part of the assignee
expressly provided in Articles 1383 and 1384. But the operation of these two articles
to the other party to the contract assigned. The assignee of the vendee is under no
is limited to the cases of rescission for lesion enumerated in Article 1381 of the Civil
personal engagement to the vendor where there is no privity between them.
Code of the Philippines, and does not apply to cases under Article 1191.
(Champion v. Brown, 6 Johns. Ch. 398; Anderson v. N. Y. & H. R. R. Co., 132 App.
Div. 183, 187, 188; Hugel v. Habel, 132 App. Div. 327, 328. ) The assignee may, Based on the foregoing, Ortigas' complaint was predicated on Article 1191 of the Civil
however, expressly or impliedly, bind himself to perform the assignor's duties. This Code, which provides:
he may do by contract with the assignor or with the other party to the contract. It Article 1191. The power to rescind obligations is implied in reciprocal ones, in case
has been held (Epstein v. Gluckin, 233 N. Y. 490) that where the assignee of the one of the obligors should not comply with what is incumbent upon him.
vendee invokes the aid of a court of equity in an action for specific performance, he
impliedly binds himself to perform on his part and subjects himself to the conditions The injured party may choose between the fulfillment and the rescission of the
of the judgment appropriate thereto. "He who seeks equity must do equity." The obligation, with the payment of damages in either case. He may also seek rescission,
converse of the proposition, that the assignee of the vendee would be bound when even after he has chosen fulfillment, if the latter should become impossible.
the vendor began the action, did not follow from the decision in that case. On the
contrary, the question was wholly one of remedy rather than right and it was held The court shall decree the rescission claimed, unless there be just cause authorizing
that mutuality of remedy is important only so far as its presence is essential to the the fixing of a period.
attainment of the ends of justice. This holding was necessary to sustain the decision.
No change was made in the law of contracts nor in the rule for the interpretation of This is understood to be without prejudice to the rights of third persons who have
an assignment of a contract. acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
Rescission under Article 1191 of the Civil Code is proper if one of the parties to the
A judgment requiring the assignee of the vendee to perform at the suit of the vendor
contract commits a substantial breach of its provisions. It abrogates the contract from
would operate as the imposition of a new liability on the assignee which would be an
its inception and requires the mutual restitution of the benefits received; 53 hence, it
act of oppression and injustice, unless the assignee had, expressly or by implication,
can be carried out only when the party who demands rescission can return whatever
he may be obliged to restore.
Considering the foregoing, Ortigas did not have a cause of action against the
petitioner for the rescission of the Deed of Sale. Under Section 2, Rule 2 of the Rules
of Court, a cause of action is the act or omission by which a party violates a right of
another. The essential elements of a cause of action are: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the defendant not to violate such right; and (3) an act or
omission on the part of the defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the
latter may maintain an action for recovery of damages or other relief. It is only upon
the occurrence of the last element that the cause of action arises, giving the plaintiff
the right to file an action in court for the recovery of damages or other relief.54

The second and third elements were absent herein. The petitioner was not privy to
the Deed of Sale because it was not the party obliged thereon. Not having come
under the duty not to violate any covenant in the Deed of Sale when it purchased the
subject property despite the annotation on the title, its failure to comply with the
covenants in the Deed of Sale did not constitute a breach of contract that gave rise
to Ortigas' right of rescission. It was rather Amethyst that defaulted on the covenants
under the Deed of Sale; hence, the action to enforce the provisions of the contract
or to rescind the contract should be against Amethyst. In other words, rescission
could not anymore take place against the petitioner once the subject property legally
came into the juridical possession of the petitioner, who was a third party to the Deed
of Sale.55

In view of the outcome, we consider to be superfluous any discussion of the other

matters raised in the petition, like the effects of the petitioner's corporate
rehabilitation and whether Ortigas was guilty of laches.

WHEREFORE, the Court GRANTS the petition for review

on certiorari; ANNULS and REVERSES the amended decision promulgated on
January 9, 2012 and the resolution promulgated on July 26, 2012 by the Court of
Appeals in C.A.-G.R. CV No. 94997; DISMISSES Civil Case No. 67978 for lack of
cause of action; and ORDERS respondent ORTIGAS & COMPANY LIMITED
PARTNERSHIP to pay the costs of suit.

SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 173399
CENTRAL BANK BOARD OF LIQUIDATORS, Petitioner
vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent
DECISION
SERENO, CJ.:
Our ruling in this case is confined to the resolution of procedural issues pertaining to
the propriety of the admission of a Second Amended/Supplemental Complaint. The
latter sought to hold the Bangko Sentral ng Pilipinas (BSP) and its Monetary Board
(MB) liable for causes of action that arose almost 10 years after the original Complaint
was filed against the now defunct Central Bank of the Philippines (CB).
THE CASE
The Petition for Review on Certiorari1 under Rule 45 of the 1997 Revised Rules of Civil
Procedure now before us was filed by the Central Bank Board of Liquidators (CB-
BOL). It seeks to annul the Decision2 of the Court of Appeals (CA), which affirmed
the Orders3 of the Regional Trial Court, National Capital Judicial Region, Makati City-
Branch 136 (RTC).
The assailed CA Decision affirmed the ruling of the RTC in consolidated Civil Case
Nos. 8108, 9675, and 10183, which had admitted the Second Amended/Supplemental
Complaint filed by respondent Banco Filipino Savings and Mortgage Bank (Banco
Filipino, or respondent).4 The CB-BOL alleges that by admitting the complaint, the
RTC erroneously included the BSP and its MB as new parties to the consolidated civil
cases and raised new causes of action not alleged in the original Complaint.5
THE FACTS
The following are the pertinent facts of the case as gathered from its records.6
On 14 February 1963, the MB of the then CB issued MB Resolution No. 223 allowing
respondent Banco Filipino to operate as a savings bank. Respondent began formal
operations on 9 July 1964.7
However, on 27 July 1984, the CB issued MB Resolution No. 955 placing Banco Filipino
under conservatorship after granting the latter's loan applications worth billions of
pesos.8 Respondent bank filed with the RTC Makati a Complaint against the CB for
the annulment of MB Resolution No. 955.9 The case was docketed as Civil Case No.
8108 and raffled to Judge Ricardo Francisco of Branch 136.10
Thereafter, on 25 January 1985, the CB issued MB Resolution No. 75 ordering the
closure of Banco Filipino and placing the latter under receivership. The Resolution
stated that since respondent had been found to be insolvent, the latter was forbidden
to continue doing business to prevent further losses to its depositors and creditors.
The Resolution further provided for the takeover of the assets and liabilities of Banco
Filipino for the benefit of its depositors and creditors, as well as for the termination
of its conservatorship.11 On 2 February 1985, Banco Filipino filed a Complaint with
the RTC Makati against the MB, assailing the latter's act of placing the bank under
receivership.12 The case was docketed as Civil Case No. 9675 and raffled to Judge
Zoilo Aguinaldo of Branch 143.13
Because of its impending closure,14 Banco Filipino filed with the CA a Petition
for Certiorari and Mandamus on 28 February 1985, seeking the annulment of MB
Resolution No. 75 on the ground of grave abuse of discretion in the issuance of the
Resolution.15 The Petition eventually reached the Supreme Court, where it was
docketed as G.R. No. 70054.
On 22 March 1985, the CB issued another Resolution placing Banco Filipino under
Jiquidation. Respondent then filed another Complaint with the RTC Makati to question
the propriety of the liquidation.16 The case was docketed as Civil Case No. 10183 and
raffled to Judge Fernando Agdamag of Branch 138.17
Meanwhile, this Court in G.R. No. 70054 promulgated on 29 August 1985 a Resolution
directing, among others, the consolidation in Branch 136 of the RTC Makati of the
following cases: (1) Civil Case No. 8108, the case for the annulment of the
conservatorship order; (2) Civil Case No. 9675, the case seeking to annul the
receivership order; and (3) Civil Case No. 10183, the case seeking to annul the order
for the liquidation of the bank.18
On 11 December 1991, this Court, in an En Banc Decision penned by Associate Justice
Leo D. Medialdea, nullified MB Resolution No. 75 and ordered the CB and its MB to
reorganize the bank and allow it to resume business.19
On 6 July 1993, during the pendency of the three consolidated cases, Republic Act
(R.A.) No. 7653, or the New Central Bank Act of 1993, took effect. Under the new
law, the CB was abolished and, in its stead, the BSP was created. The new law also
created the CB-BOL for the purpose of administering and liquidating the CB's assets
and liabilities,20 not all of which had been transferred to the BSP.21
Pursuant to the Decision of this Court in G.R. No. 70054, the BSP reopened Banco
Filipino and allowed it to resume business on 1 July 1994.22
On 29 May 1995, pursuant to the recent development, Banco Filipino filed a Motion
to Admit Attached Amended/Supplemental Complaint23 in the three consolidated
cases - Civil Case Nos. 8108, 9675, and 10183 - before the RTC. In its
Amended/Supplemental Complaint, respondent bank sought to substitute the CB-BOL
for the defunct CB and its MB. Respondent also aimed to recover at least ₱18 billion
in actual damages, litigation expenses, attorney's fees, interests, and costs of suit
against petitioner and individuals who had allegedly acted with malice and evident
bad faith in placing the bank under conservatorship and eventually closing it down in
1985.24
The trial court, through an Order dated 29 March 1996, granted the Motion to Admit
filed by Banco Filipino and accordingly admitted the latter's Amended/Supplemental
Complaint. Consequently, the CB-BOL was substituted for the defunct CB in
respondent's civil cases, which are still pending with the RTC.25
On 25 September 2003, or more than 10 years from the enactment of R.A. 7653,
Banco Filipino again filed a Motion to Admit Second Amended/Supplemental
Complaint26 in the consolidated civil cases before the RTC. In that Second
Amended/Supplemental Complaint,27 respondent sought to include the BSP and its
MB - "the purported successor-in-interest of the old CB"28 - as additional defendants
based on the latter's alleged acts or omissions as follows:
1. The BSP and the MB refused to grant Banco Filipino a universal banking license,
unless it complied with their stringent conditions intended to further deplete its
resources, contrary to the provisions of the Memorandum of Agreement the parties
entered into on 20 December 1999.29
2. The BSP and the MB engaged in a smear campaign against Banco Filipino intended
to undermine the trust and confidence of its depositors and the public in general.30
3. With the objective of gaining control of respondent bank, the BSP disqualified a
member of the former' s board of directors.31
4. The BSP and its MB conspired with a group of minority stockholders of Banco
Filipino to institute a case against respondent and thereby place it under a state of
receivership or conservatorship or under a management committee.32
5. The demands of Banco Filipino for an out-of-court settlement of its damage claims
against the BSP have gone unheeded and have resulted in burgeoning litigation
expenses and other damages, for which respondent continues to suffer as a result of
prolonged litigation.33
Banco Filipino claimed that the BSP employed "coercive measures" 34 that forced
respondent to enter into a Memorandum of Agreement (MOA) regarding the collection
of advances extended to the latter by the defunct CB. In addition, respondent also
alleged that its present dealings with the BSP and the MB have become increasingly
difficult, especially in obtaining favorable actions on its requests and other official
dealings.35
Banco Filipino's Motion to Admit its Second Amended/Supplemental Complaint was
opposed by the CB-BOL based on the following grounds:
1. Banco Filipino's Second Amended/Supplemental Complaint was not supported by
a board resolution that authorized it to file the amended or supplemental complaint.
2. The second supplemental complaint raised new and independent causes of action
against a new party- the BSP - which was not an original party.
3. The second supplemental complaint was violative of the rule on the joinder of
causes of action, because it alleged those that did not arise from the same contract,
transaction or relation between the parties - as opposed to those alleged in the
complaint sought to be amended or supplemented - and differed from the causes of
action cited in the original Complaint.
4. The admission of the second supplemental complaint would expand the scope of
the dispute in the consolidated civil cases to include new causes of action against new
parties like the BSP, resulting in a delay in the resolution of the cases.36
On 27 January 2004, the RTC, through an Order penned by Presiding Judge Rebecca
R. Mariano, granted the Motion to Admit Banco Filipino's Second
Amended/Supplemental Complaint.37 The CB-BOL moved for the reconsideration of
the trial court's Order,38 but the motion was denied in an Order dated 20 July 2004.39
On 1 October 2004, petitioner CB-BOL filed with the CA a Petition for Certiorari under
Rule 65, docketed as CA-G.R. SP No. 86697.40 It questioned the propriety of the RTC's
Order admitting Banco Filipino's Second Amended/Supplemental Complaint and
committing grave abuse of discretion in the process. Reiterating the grounds stated
in its Opposition to the Motion to Admit the Second Amended/Supplemental
Complaint, petitioner contended that the complaint consisted of, among others, an
improper joinder of parties and other issues that were entirely different from those
raised in the original complaint.41
On 27 January 2006, the CA dismissed the CB-BOL's Petition and affirmed in toto the
trial court's Order admitting the Second Amended/Supplemental Complaint.42
The appellate court ruled that the old CB continued to exist and remained a defendant
in the consolidated civil cases, albeit under a new name: CB-BOL.
It also ruled that, pursuant to R.A. 7653, the BSP was the successor-in-interest of the
old CB. Further, with the transfer of assets from the CB to the BSP during the
pendency of the subject civil cases, the latter now became a transferee pendente
lite. Therefore, the CA concluded that there were no new parties impleaded in the
civil cases when the Second Amended/Supplemental Complaint was admitted by the
trial court.43
The CA further sustained the RTC's ruling that respondent Banco Filipino did not raise
new issues against petitioner CB-BOL or seek new reliefs or claim new damages from
the latter. Supposedly, respondent merely sought the addition of the BSP and its MB
as parties-defendants in the consolidated civil case, as they were the successors-in-
interest of the defunct CB and its MB.44
The assailed CA Decision also attributed to the CB-BOL the apparent delay in the
resolution of the current dispute, based on the number of certiorari cases the latter
had filed with the CA and the Supreme Court since the commencement of those
cases.45
On 16 February 2006, petitioner filed a Motion for Reconsideration seeking the
reversal of the Decision dated 27 January 2006 in CA-G.R. SP No. 86697.46 On 27
June 2006, the CA denied the Motion after finding no "plausible reason" to depart
from its assailed Decision.47
Petitioner CB-BOL now comes to this Court via a Petition for Review on Certiorari. It
assails the Decision of the appellate court in CA-G.R. SP No. 86697, which affirmed in
toto the trial court's Order admitting the Second Amended/Supplemental Complaint
of Banco Filipino. Specifically, petitioner raises the following arguments:48
I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S ORDER
ADMITTING RESPONDENT'S SECOND AMENDED/SUPPLEMENTAL COMPLAINT
AGAINST THE BSP, DESPITE THE FACT THAT THE PARTIES, SUBJECT MATTERAND
CAUSES OF ACTION ASSERTED THEREIN ARE DIFFERENT FROM AND TOTALLY
UNRELATED TO RESPONDENT'S CAUSES OF ACTION UNDER THE FIRST AMENDED
SUPPLEMENTAL COMPLAINT AGAINST THE DEFUNCT CB.
xxxx
II.
THE COURT OF APPEALS ERRED IN REDUCING THE ADMISSION OF THE SECOND
AMENDED/SUPPLEMENTAL COMPLAINT TO THE MERE AMENDMENT OF A PLEADING
"TO SUBSTITUTE OR JOIN A TRANSFEREE PENDENTE LITE" UNDER SEC. 19, RULE
3 OF THE REVISED RULES OF COURT x x x.
xxxx
III.
THE COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURT'S RULING THAT
THE OLD CB CONTINUES TO EXIST AS PETITIONER CB-BOL. PETITIONER IS A
SEPARATE, DISTINCT AND INDEPENDENT ENTITY FROM THE DEFUNCT CB WHICH
HAS BEEN ABOLISHED UPON THE ENACTMENT OF THE NEW CENTRAL BANK ACT.
IV.
PETITIONER'S PLEA AGAINST THE ADMISSION OF RESPONDENT'S SECOND
AMENDED/SUPPLEMENTAL COMPLAINT IS NOT A DILATORY TACTIC OR A MERE
RESORT TO TECHNICALITY; RATHER, IT IS AN EARNEST APPEAL FOR PETITIONER
TO BE FREE FROM A USELESS AND WASTEFUL LEGAL CONTEST WHICH SHOULD BE
THE SUBJECT OF A SEPARATE CASE SOLELY BETWEEN THE RESPONDENT AND THE
BSP. IT IS A PLEA BY PETITIONER TO SECURE A JUST, SPEEDY AND INEXPENSIVE
DETERMINATION OF RESPONDENT'S CASE AGAINST IT FOR ACTS SUPPOSEDLY
PERPETRATED BY THE OLD CB IN 1984-1985 FOR WHICH IT IS SUPPOSEDLY THE
SUCCESSOR-IN-INTEREST.
THE ISSUE
The crucial issue to be resolved here is whether the RTC erred in admitting Banco
Filipino's Second Amended/Supplemental Complaint in the consolidated civil cases
before it.
OUR RULING
The Petition of the CB-BOL is impressed with merit.
It must be noted at this point that the BSP and its MB are not yet required to answer
the RTC Complaint, as the issue of their addition as parties is yet to be settled.
Nevertheless, whether or not the BSP and its MB are transferees or successors-in-
interest of the CB and its MB, the former's addition or substitution as parties to this
case must comply with the correct procedure and form prescribed by law.
The second amendment of the
Complaint was improper.
Rule 10 of the 1997 Revised Rules of Court allows the parties to amend their pleadings
(a) by adding or striking out an allegation or a party's name; or (b) by correcting a
mistake in the name of a party or rectifying a mistaken or an inadequate allegation
or description in the pleadings for the purpose of determining the actual merits of the
controversy in the most inexpensive and expeditious manner. 49
The prevailing rule on the amendment of pleadings is one of liberality,50 with the end
of obtaining substantial justice for the parties. However, the option of a party-litigant
to amend a pleading is not without limitation. If the purpose is to set up a cause of
action not existing at the time of the filing of the complaint, amendment is not
allowed. If no right existed at the time the action was commenced, the suit cannot
be maintained, even if the right of action may have accrued thereafter.51
In the instant case, the causes of action subject of the Second
Amended/Supplemental Complaint only arose in 1994 - well after those subject of the
original Complaint. The original Complaint was based on the alleged illegal closure of
Banco Filipino effected in 1985 by the defunct CB and its MB.
On the other hand, the Second Amended/Supplemental Complaint stemmed from the
alleged oppressive and arbitrary acts committed by the BSP and its MB against Banco
Filipino after respondent bank was reopened in 1994. Since the acts or omissions
allegedly committed in violation of respondent's rights are different, they constitute
separate causes of action.52
In its Comment53 on the present Petition, Banco Filipino contends, as the RTC and
the CA similarly ruled, that the Second Amended/Supplemental Complaint does not
alter the substance of the original demand, change the cause of action against the
original defendants, or seek additional or new reliefs.54 Rather, respondent contends
that the only change sought is the addition of the BSP and its MB as parties-
defendants. Respondent further argues that what petitioner erroneously views as new
causes of action are merely demonstrations to show that the BSP has come to adopt
the same repressive and oppressive attitude of the latter's alleged predecessor-in-
interest.55
This contention is, however, belied by a closer examination of the Second
Amended/Supplemental Complaint, in which respondent asks the Court to order the
defendants to pay, among others, actual damages of at least ₱18.8 billion "as a
consequence of the acts herein complained of."56
The "acts complained of'' cover not just the conservatorship, receivership, closure,
and liquidation of Banco Filipino in 1984 and 1985, but also the alleged acts of
harassment committed by the BSP and its MB after respondent bank was reopened
in 1994. These acts constituted a whole new cause of action. In effect, respondent
raised new causes of action and asserted a new relief in the Second
Amended/Supplemental Complaint. If it is admitted, the RTC would need to look into
the propriety of two entirely different causes of action. This is not countenanced by
law, as explained in the preceding paragraphs.
The second supplemental pleading
was improper.
Rule 10 of the 1997 Revised Rules of Court allows the parties to supplement their
pleadings by setting forth transactions, occurrences, or events that happened since
the date of the pleading sought to be supplemented.57
However, the option of a party-litigant to supplement a pleading is not without
limitation. A supplemental pleading only serves to bolster or add something to the
primary pleading. Its usual function is to set up new facts that justify, enlarge, or
change the kind of relief sought with respect to the same subject matter as that of
the original complaint.58
This Court ruled in Leobrera v. CA59 that a supplemental complaint must be founded
on the same cause of action as that raised in the original complaint. Although
in Planters Development Bank v. LZK Holdings & Development Corporation,60 the
Court clarified that the fact that a supplemental pleading technically states a new
cause of action should not be a bar to its allowance, still, the matter stated in the
supplemental complaint must have a relation to the cause of action set forth in the
original pleading. That is, the matter must be germane and intertwined with the cause
of action stated in the original complaint so that the principal and core issues raised
by the parties in their original pleadings remain the same.61
In the instant case, Banco Filipino, through the Second Amended/Supplemental
Complaint, attempted to raise new and different causes of action that arose only in
1994.1a\^/phi1 These causes of action had no relation whatsoever to the causes of
action in the original Complaint, as they involved different acts or omissions,
transactions, and parties. If the Court admits the Second Amended/Supplemental
Complaint under these circumstances, there will be no end to the process of amending
the Complaint. What indeed would prevent respondent from seeking further
amendments by alleging acts that may be committed in the future?
For these reasons, whether viewed as an amendment or a supplement to the original
Complaint, the Second Amended/Supplemental Complaint should not have been
admitted.
The amendment/supplement violates
the rules on joinder of parties and
causes of action.
Moreover, the admission of the Second Amended/Supplemental Complaint is
inappropriate because it violates the rule on joinder of parties and causes of action.
If its admission is upheld, the causes of action set forth therein would be joined with
those in the original Complaint. The joinder of causes of action is indeed allowed
under Section 5, Rule 2 of the 1997 Rules of Court;62 but if there are multiple parties,
the joinder is made subject to the rules on joinder of parties under Section 6, Rule
3.63 Specifically, before causes of action and parties can be joined in a complaint
involving multiple parties, (1) the right to relief must arise out of the same transaction
or series of transactions and (2) there must be a question of law or fact common to
all the parties.64
In the instant case, Banco Filipino is seeking to join the BSP and its MB as parties to
the complaint. However, they have different legal personalities from those of the
defunct CB and its MB: firstly, because the CB was abolished by R.A. 7653, and the The RTC National Capital Judicial Region, Makati City, Branch 136 is
BSP created in its stead; and secondly, because the members of each MB are natural hereby DIRECTED to proceed with the trial of this case with utmost dispatch.
persons. These factors make the BSP and its MB different from the CB and its MB.
Since there are multiple parties involved, the two requirements mentioned in the SO ORDERED.
previous paragraph must be present before the causes of action and parties can be
joined. Neither of the two requirements for the joinder of causes of action and parties
was met.

First, the reliefs for damages prayed for by respondent did not arise from the same
transaction or series of transactions. While the damages prayed for in the first
Amended/Supplemental Complaint arose from the closure of Banco Filipino by the
defunct CB and its MB, the damages prayed for in the Second Amended/Supplemental
Complaint arose from the alleged acts of oppression committed by the BSP and its
MB against respondent.

Second, there is no common question of fact or law between the parties involved.
The acts attributed by Banco Filipino to the BSP and its MB pertain to events that
transpired after this Court ordered the respondent bank's reopening in 1994. These
acts bear no relation to those alleged in the original Complaint, which related to the
propriety of the closure and liquidation of respondent as a banking institution way
back in 1985.

The only common factor in all these allegations is respondent bank itself as the
alleged aggrieved party. Since the BSP and its MB cannot be joined as parties, then
neither can the causes of action against them be joined.

This ruling is confined to

procedural issues.

As mentioned at the outset, the Court will confine its ruling on this Petition to
procedural issues pertaining to the propriety of the admission of the Second
Amended/Supplemental Complaint. We will not address the issues raised by petitioner
with regard the findings of the trial and the appellate court that the BSP is the
successor-in-interest of the defunct CB65 and is considered a transferee pendente
lite66 in the civil cases. These findings relate to the BSP's potential liability for the
causes of action alleged in the original Complaint. At issue here is Banco Filipino's
attempt, through the Second Amended/Supplemental Complaint, to hold the BSP and
its MB liable for causes of action that arose in 1994. Respondent is not without any
relief. If the RTC finds that the BSP was indeed a transferee pendente lite, the failure
to implead it would not prevent the trial court from holding the BSP liable, should
liability now attach for acts alleged in the original Complaint.67

WHEREFORE, the Petition of the CB-BOL is GRANTED, and the Decision of the
Court of Appeals dated 27 January 2006 and Resolution dated 27 June 2006 in CA-
G.R. SP No. 86697 are hereby REVERSED and SET ASIDE.
G.R. No. 185894, August 30, 2017 therefore, in bad faith.12

BELO MEDICAL GROUP, INC., Petitioner, v. JOSE L. SANTOS AND VICTORIA A second inspection was attempted through a written demand by Santos on May 15,
G. BELO,Respondents. 2008.13 Again, he was unsuccessful.

DECISION
LEONEN, J.:
A conflict between two (2) stockholders of a corporation does not automatically
render their dispute as intra-corporate. The nature of the controversy must also be
examined.1
In this Petition for Review on Certiorari2 under Rule 45 of the Rules of Court, Belo
Medical Group, Inc. (Belo Medical Group) assails the Regional Trial Court December
8, 2008 Joint Resolution in Civil Case No. 08-397.3 This Joint Resolution granted
respondent Jose L. Santos' (Santos) Motion to Dismiss and Belo Medical Group's
Complaint for interpleader and Supplemental Complaint for Declaratory Relief against
Santos and Victoria G. Belo (Belo), and declared all other pending incidents as moot. 4
Belo wrote to Belo Medical Group on May 20, 2008 to reiterate her objections to
Santos' attempts at inspecting corporate books and his inquiry regarding a patient.
Belo further manifested that she was exercising her right as a shareholder to inspect
the books herself to establish that the 25 shares were not owned by Santos, and that
he did not pay for these shares.14
Thus, Belo Medical Group filed a Complaint for Interpleader15 with Branch 149,
Regional Trial Court, Makati City on May 21, 2008. Belo Medical Group alleged that
while Santos appeared to be a registered stockholder, there was nothing on the
record to show that he had paid for the shares under his name. The Complaint was
filed "to protect its interest and compel [Belo and Santos] to interplead and litigate
their conflicting claims of ownership of, as well as the corresponding right of
inspection arising from, the twenty-five (25) [Belo Medical Group] shares between
themselves pursuant to Rule 62 of the 1997 Rules of Civil Procedure . . ."16 The
following reliefs were prayed for:

The controversy began on May 5, 20085 when Belo Medical Group received a request (i) issue an Order summoning and requiring defendants Santos and Belo to interplead
from Santos for the inspection of corporate records.6 Santos claimed that he was a with each other to resolve their conflicting claims of ownership of the 25 shares of
registered shareholder and a co-owner of Belo's shares, as these were acquired while stock of [Belo Medical Group], including their opposing claims of exclusive entitlement
they cohabited as husband and wife.7 Santos sought advice on his probable removal to inspect [Belo Medical Group] corporate records;
as director of the corporation considering that he was not notified of meetings where
he could have been removed. He also inquired on the election of Alfredo Henares (ii) after due proceedings render judgment in favor of the proper defendant; and
(Henares) as Corporate Secretary in 2007 when Santos had not been notified of a
meeting for Henares' possible election. Finally, he sought explanation on the (iii) allow plaintiff [Belo Medical Group] to recover attorney's fees and litigation
corporation's failure to inform him of the 2007 annual meeting and the holding of an expenses in the amount of at least Php1,000,000.00 jointly and solidarity against both
annual meeting in 2008.8 Santos' concern over the corporate operations arose from defendants and for them to pay the costs of suit.17
the alleged death of a patient in one (1) of its clinics.9
On the same day, Henares wrote Belo's and Santos' respective counsels to inform
Santos was unsuccessful in inspecting the corporate books as Henares, the officer- them of the Complaint.18 Despite receipt, Santos' counsel still proceeded to Belo
in-charge of corporate records, was travelling. Belo Medical Group asked for time in Medical Group's Makati office on May 22, 2008, where, again, they were unsuccessful
order for Henares to accommodate Santos' request.10 in inspecting the corporate books.19

After the first attempt to inspect, Belo wrote Belo Medical Group on May 14, 2007 to
repudiate Santos' co-ownership of her shares and his interest in the corporation. She
claimed that Santos held the 25 shares in his name merely in trust for her, as she,
and not Santos, paid for these shares. She informed Belo Medical Group that Santos
already had a pending petition with the Regional Trial Court to be declared as co-
owner of her properties. She asserted that unless a decision was rendered in Santos'
favor, he could not exercise ownership rights over her properties. 11
Belo also informed Belo Medical Group that Santos had a business in direct
competition with it. She suspected that Santos' request to inspect the records of Belo
Medical Group was a means to obtain a competitor's business information, and was,
Santos, for the third time, sent a letter on May 22, 2008 to schedule an inspection of
the corporate books and warned that continued rejection of his request exposed the
corporation to criminal liability.20 Nothing came out of this last attempt as well.
Bela and Bela Medical Group wrote to Santos on May 27, 2008 to inform him that he
was barred from accessing corporate records because doing so would be inimical to
Belo Medical Group's interests.21Through another letter on May 28, 2008, Santos was
reminded of his majority share in The Obagi Skin Health, Inc. the owner and operator
of the House of Obagi (House of Obagi) clinics. He was likewise reminded of the
service of a notice of the 2007 special meeting of stockholders to his address at Valero
Street, Makati City, contrary to his claim.22
 act or omission of Santos and Belo that violated Belo Medical Group's rights. There
On May 29, 2008, Belo Medical Group filed a Supplemental Complaint23 for was simply no conflict on the ownership of the 25 shares of stock under Santos' name.
declaratory relief under Rule 63 of the Rules of Court. In its Supplemental Complaint, Based on the corporation's 2007 Articles of Incorporation and General Information
Belo Medical Group relied on Section 7424 of the Corporation Code to deny Santos' Sheet, Santos was reflected as a stockholder and owner of the 25 shares of stock. No
request for inspection. It prayed that Santos be perpetually barred from inspecting documentary evidence was submitted to prove that Belo owned these shares and
its books due to his business interest in a competitor.25 Should the ruling for merely transferred them to Santos as nominal shares. 40
interpleader be in favor of Santos, Belo Medical Group prayed that the trial court:
a. exercise its power under Rule 63 of the Revised Rules of Civil Procedure and give Santos further argued that the filing of the complaints was an afterthought to take
a proper construction of Sections 74 and 75 of the Corporation Code in relation to the attention away from Belo Medical Group's criminal liability when it refused Santos'
facts presented above, and declare that plaintiff can rightfully decline defendant demand to inspect the records of the corporation. For years, neither Belo Medica1
Santos's request for inspection under those sections and related provisions and Group nor Belo questioned Santos' standing in the corporation. No change in
jurisprudence; and ownership from Santos to another person was reflected in the company's General
Information Sheet.41
b. allow plaintiff to recover attorney's fees and litigation expenses from defendant
Santos in the amount of at least PHP1,000,000.00 and the costs of suit.26 Santos also invoked the doctrine of piercing the corporate veil as Belo owned 90% of
Belo Medical Group. Her claim over the 25 shares was a ploy to defeat Santos' right
Belo Medical Group's Complaint and Supplemental Complaint were raffled to Branch
to inspect corporate records. He asserts that the Complaint for interpleader was an
149 of the Regional Trial Court of Makati, a special commercial court,27 thus
anticipatory move by the company to evade criminal liability upon its denial of Santos'
classifying them as intra-corporate.28
requests.42
Belo filed her Answer Ad Cautelam with Cross-Claim to put on record her defenses
In addition, Santos argued that a prerequisite to filing these cases is that the plaintiff
that Santos had no right to inspect the books as he was not the owner of the 25
has not yet incurred liability to any of the parties. Since Belo Medical Group had
shares of stock in his name and that he was acting in bad faith because he was a
already incurred criminal liability, it could no longer file a complaint for interpleader
majority owner of House of Obagi.29
or declaratory relief.43
Belo further argued that the proceedings should not have been classified as intra-
Santos denied any conflict of interest because Belo Medical Group's products and
corporate because while their right of inspection as shareholders may be considered
services differed from House of Obagi's44 Belo Medical Group's primary purpose was
intra-corporate, "it ceases to be that and becomes a full-blown civil law question if
the management and operation of skin clinics45 while the House of Obagi's main
competing rights of ownership are asserted as the basis for the right of inspection."30
purpose was the sale and distribution of high-end facial products.46
Meanwhile, on several dates, the trial court sheriff attempted to personally serve
On October 29, 2008, Belo Medical Group filed its Opposition47 and argued that the
Santos with summons.31 After unsuccessful attempts,32 the sheriff resorted to
Motion to Dismiss was a prohibited pleading under Section 8 of the Interim Rules of
substituted service in Santos' Makati office condominium unit. 33
Procedure Governing Intra-Corporate Controversies.
On July 4, 2008, Belo Medical Group filed an Omnibus Motion for Clarificatory Hearing
Belo Medical Group reiterated that Belo and Santos must litigate against each other
and for Leave to File Consolidated Reply,34 praying that the case be tried as a civil
to determine who rightfully owned the 25 shares. An accommodation of one of them,
case and not as an intra-corporate controversy. It argued that the Interim Rules of
absent a resolution to this issue, would make Belo Medical Group liable to the other.48
Procedure Governing Intra-Corporate Controversies35 did not include special civil
actions for interpleader and declaratory relief found under the Rules of Court. Belo
On its supposed criminal liability when it refused Santos access to corporate records,
Medical Group clarified that the issue on ownership of the shares of stock must first
Belo Medical Group explained that the independent liability necessary to defeat
be resolved before the issue on inspection could even be considered ripe for
complaints for interpleader arose from a final judgment and not merely a cause of
determination.36
action that has accrued.49
Belo Medical Group later on moved that Santos be declared in default.37 Instead of
Finally, Belo Medical Group averred that substantiation must be done during trial. The
filing an answer Santos filed a Motion to Dismiss.38
dismissal of the case would be premature.50
Apart from procedural infirmities, Santos argued that Belo Medical Group's Complaint
Belo's Opposition dated October 29, 2008 raised the same arguments of Belo Medical
and Supplemental Complaint must be dismissed "for its failure to state, and
Group.51
ultimately, lack of, a cause of action."39 No ultimate facts were given to establish the
Santos filed his Reply to the Oppositions on November 18, 2008. 52 He agreed that Belo Medical Group, on the other hand, directly filed its Petition for Review with this
the controversy was not intra-corporate but civil in nature, as it involved Court, alleging that purely questions of law are at issue.
ownership.53 However, he stood firm on his arguments that the case should be
dismissed due to the Complaints' failure to state a cause of action54and the trial court's Belo Medical Group argues that it is enough that there are two (2) people who have
failure to acquire jurisdiction over his person.55 adverse claims against each other and who are in positions to make effective claims
for interpleader to be given due course.65 Belo Medical Group cites Lim v. Continental
On December 8, 2008, the assailed Joint Resolution56 was issued by the trial court Development Corporation,66 which allowed a complaint for interpleader to continue
resolving the following incidents: Belo Medical Group's Omnibus Motion for because two (2) parties claimed ownership over the same shares of stock.67
Clarificatory Hearing and for Leave to File Consolidated Reply and Motion to Declare
Santos in Default, and Santos' Motion to Dismiss. The trial court declared the case as On January 30, 2009, Belo Medical Group filed a Manifestation/Disclosure68 informing
an intra-corporate controversy but dismissed the Complaints.57 this Court that on January 28, 2009, it received Belo's Petition for Review filed before
the Court of Appeals. On February 4, 2009, this Court also received Belo's
The trial court characterized the dispute as "intrinsically connected with the regulation Manifestation69 that she filed a Petition for Review before the Court of Appeals,
of the corporation as it involves the right of inspection of corporate assailing the Joint Resolution primarily because it dismissed her counterclaims. She
records."58 Included in Santos and Belo's conflict was a shareholder's exclusive right also furnished this Court a copy of her Manifestation filed with the Court of Appeals
to inspect corporate records. In addition, the issue on the ownership of shares to inform it of Belo Medical Group's Petition for Review before this Court. 70
requires the application of laws and principles regarding corporations.59
On April 15, 2009, Belo filed her Comment71 and manifested that she agrees with the
However, the Complaint could not flourish as Belo Medical Group "failed to sufficiently arguments raised by Belo Medical Group.
allege conflicting claims of ownership over the subject shares."60 In justifying failure
to state a cause of action, the trial court reasoned: On April 28, 2009, Santos filed his Comment.72 He argues that the Petition filed by
Plaintiff clearly admits in the complaint that defendant Santos is the registered Belo Medical Group should be dismissed as the wrong mode of appeal. It should have
stockholder of the subject shares albeit no records show that he made any payments filed an appeal under Rule 43, pursuant to the Interim Rules on Intra-Corporate
thereof. Also, notwithstanding defendant Belo's claim that she is the true owner Disputes.73 He alleges that Belo Medical Group committed forum shopping. It filed
thereof, there was no allegation that defendant Santos is no longer the holder on the present Petition for Review after Belo had already filed an appeal under Rule 43
record of the same or that it is now defendant Belo who is the registered stockholder before the Court of Appeals. He asserts that Belo and Belo Medical Group have the
thereof. In fact, the complaint even alleges that defendant Santos holds the 25 BMGI san1e interest. Belo, owner of 90% of the shares of stock of the corporation, dictates
shares merely as nominal qualifying shares in trust for defendant Belo. Thus, the Belo Medical Group's actions, which were ultimately for Belo's benefit and interests.74
complaint failed to state a cause of action that would warrant the resort to an action
for interpleader.61 Meanwhile, on July 31, 2009, the Court of Appeals dismissed Belo's Petition for Review
and ruled that the pending case before this Court was the more appropriate vehicle
Though a motion to dismiss is a prohibited pleading under the Interim Rules of
to determine the issues.75
Procedure Governing Intra-Corporate Controversies, the trial court ruled that Section
2, Rule 1 of these rules allowed for the Rules of Court to apply suppletorily. According
The issues for this Court's resolution are as follows:
to the Rules of Court, motions to dismiss are allowed in interpleader cases.62
First, whether or not Belo Medical Group, Inc. committed forum shopping;
Finally, the Complaint for Declaratory Relief was struck down as improper because it
sought an initial determination on whether Santos was in bad faith and if he should
Second, whether or not the present controversy is intra-corporate; Third, whether or
be barred from inspecting the books of the corporation. Only after resolving these
not Belo Medical Group, Inc. came to this Court using the correct mode of appeal;
issues can the trial court determine his rights under Sections 74 and 75 of the
and
Corporation Code. The act of resolving these issues is not within the province of the
special civil action as declaratory relief is limited to the construction and declaration
Finally, whether or not the trial court had basis in dismissing Belo Medica] Group,
of actual rights and does not include the determination of issues. 63
Inc.'s Complaint for Declaratory Relief.
From the Joint Resolution, Belo and Belo Medical Group pursued different remedies.
I
Belo filed her Petition for Review before the Court of Appeals docketed as CA G.R.
No. 08-397.64 Neither Belo nor the Belo Medical Group is guilty of forum shopping.

Forum shopping exists when parties seek multiple judicial remedies simultaneously
or successively, involving the same causes of action, facts, circumstances, and
transactions, in the hopes of obtaining a favorable decision.76 It may be accomplished
by a party defeated in one forum, in an attempt to obtain a favorable outcome in
another, "other than by appeal or a special civil action for certiorari."77
Forum shopping trivializes rulings of courts, abuses their processes, cheapens the
administration of justice, and clogs court dockets.78 In Top Rate Construction &
General Services, Inc. v. Paxton Development Corporation:79
What is critical is the vexation brought upon the courts and the litigants by a party
who asks different courts to rule on the same or related causes and grant the same
or substantially the same reliefs and in the process creates the possibility of conflicting
decisions being rendered by the different fora upon the same issues.80
Rule 7, Section 5 of the Rules of Court contains the rule against forum shopping:
Section 5. Certification against forum shopping. - The plaintiff or principal party shall
certify under oath in the complaint or other initiatory pleading asserting a claim for
relief, or in a sworn certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such other
per ding action or claim, a complete statement of the present status thereof; and (c)
if he should thereafter learn that the same or similar action or claim has been filed or
is pending, he shall report that fact within five (5) days therefrom to the court wherein
his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice; unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of
the undertakings therein shall constitute indirect contempt of court, without prejudice
to the corresponding administrative and criminal actions. If the acts of the party or
his counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as
well as a cause for administrative sanctions.
When willful and deliberate violation is clearly shown, it can be a ground for all
pending cases' summary dismissal with prejudice81 and direct contempt 82
Belo Medical Group filed its Petition for Review on Certiorari under Rule 45 before this
Court to appeal against the Joint Resolution of the trial court. It did not file any other
petition related to the case, as indicated in it verification and certification against
forum shopping. It was Belo, a defendant in Belo Medical Groups Complaint, who filed
a separate appeal under Rule 43 with the Court of Appeals primarily to protect her
counterclaims. Belo and Belo Medical Group both filed their respective Petitions for
Review on January 28, 2009, the lat day within the period allowed to do so. 83 The
Court of Appeals already ruled that litis pendencia was present when Belo and Belo
Medical Group filed their respective petitions on the same date before different fora.
The two petitions involved the same parties, rights and reliefs sought, and causes of
action.84 This is a decision this Court can no longer disturb.
Neither Belo Medical Group nor Belo can be faulted for willful and deliberate violation
of the rule against forum shopping. Their prompt compliance of the certification
against forum shopping appended to their Petitions negates willful and deliberate
intent.
Belo Medical Group was not remiss in its duty to inform this Court of a similar action
or proceeding related to its Petition. It promptly manifested before this Court its
receipt of Belo's Petition before the Court of Appeals. Belo Medical Group and Belo
manifested before this Court that Belo filed a Rule 43 petition to protect her
counterclaims and to question the same Joint Resolution issued by the trial court.
Both did so within five (5) days from discovery, as they undertook in their respective
certificates against forum shopping.
The issue of forum shopping has become moot. The appeal under Rule 43 filed by
Belo has been dismissed by the Court of Appeals on the ground of litis
pendencia.85 The purpose of proscribing forum shopping is the proliferation of
contradictory decisions on the same controversy.86 This possibility no longer exists in
this case.
II
Belo Medical Group filed a case for interpleader, the proceedings of which are covered
by the Rules of Court. At its core, however, it is an intra-corporate controversy.
A.M. No. 01-2-04-SC, or the Interim Rules of Procedure Governing Intra-Corporate
Controversies, enumerates the cases where the rules will apply:
Section 1. (a) Cases Covered - These Rules shall govern the procedure to be observed
in civil cases involving the following:
1. Devices or schemes employed by, or any act of, the board of
directors, business associates, officers or partners, amounting to
fraud or misrepresentation which may be detrimental to the
interest of the public and/or of the stockholders, partners, or
members of any corporation, partnership, or association;
2. Controversies arising out of intra-corporate, partnership, or
association relations, between and among stockholders, members,
or associates; and between, any or all of them and the corporation,
partnership, or association of which they are stockholders,
members, or associates, respectively;
3. Controversies in the election or appointment of directors, trustees,
officers, or managers of corporations, partnerships, or associations;
 4. Derivative suits; and
5. Inspection of corporate books.87
The same rules prohibit the filing of a motion to dismiss:
Section 8. Prohibited Pleadings. -The following pleadings are prohibited: (1) Motion
to dismiss;
(2) Motion for a bill of particulars;
(3) Motion for new trial or for reconsideration of judgment or order, or for reopening
of trial;
(4) Motion for extension of time to file pleadings, affidavits or any other paper, except
those filed due to clearly compelling reasons. Such motion must be verified and under
oath; and
(5) Motion for postponement and other motions of similar intent, except those filed
due to clearly compelling reasons. Such motion must be verified and under oath.
To determine whether an intra-corporate dispute exists and whether this case
requires the application of these rules of procedure, this Court evaluated the
relationship of the parties. The types of intra-corporate relationships were reviewed
in Union Glass & Container Corporation v. Securities and Exchange Commission:88
[a] between the corporation, partnership or association and the public; [b] between
the corporation, partnership or association and its stockholders, partners, members,
or officers; [c] between the corporation, partnership or association and the state in
so far as its franchise, permit or license to operate is concerned; and [d] among the
stockholders, partners or associates themselves.89
For as long as any of these intra-corporate relationships exist between the parties,
the controversy would be characterized as intra-corporate.90 This is known as the
"relationship test."
DMRC Enterprises v. Este del Sol Mountain Reserve, Inc.91 employed what would later
be called as the "nature of controversy test." It became another means to determine
if the dispute should be considered as intra-corporate.
In DMRC Enterprises, Este del Sol leased equipment from DMRC Enterprises. Part of
Este del Sol's payment was shares of stock in the company. When Este del Sol
defaulted, DMRC Enterprises filed a collection case before the Regional Trial Court.
Este del Sol argued that it should have been filed before the Securities and Exchange
Commission as it involved an intra-corporate dispute where a corporation was being
compelled to issue its shares of stock to subscribers. This Court held that it was not
just the relationship of the parties that mattered but also the conflict between them:
The purpose and the wording of the law escapes the respondent. Nowhere in said
decree do we find even so much as an intimidation that absolute jurisdiction and
control is vested in the Securities and Exchange Commission in all matters affecting
corporations. To uphold the respondent's argument would remove without legal
imprimatur from the regular courts all conflicts over matters involving or affecting
corporations, regardless of the nature of the transactions which give rise to such
disputes. The courts would then be divested of jurisdiction not by reason of the nature
of the dispute submitted to them for adjudication, but solely for the reason that the
dispute involves a corporation. This cannot be done. To do so would not only be to
encroach on the legislative prerogative to grant and revoke jurisdiction of the courts
but such a sweeping interpretation may suffer constitutional infirmity. Neither can we
reduce jurisdiction of the courts by judicial fiat (Article X, Section 1, The
Constitution).92
This Court now uses both the relationship test and the nature of the controversy test
to determine if an intra-corporate controversy is present.93
Applying the relationship test, this Court notes that both Belo and Santos are named
shareholders in Belo Medical Group's Articles of Incorporation94 and General
Information Sheet for 2007.95 The conflict is clearly intra-corporate as it involves two
(2) shareholders although the ownership of stocks of one stockholder is questioned.
Unless Santos is adjudged as a stranger to the corporation because he holds his
shares only in trust for Belo, then both he and Belo, based on official records, are
stockholders of the corporation. Belo Medical Group argues that the case should not
have been characterized as intra-corporate because it is not between two
shareholders as only Santos or Belo can be the rightful stockholder of the 25 shares
of stock. This may be true. But this finding can only be made after trial where
ownership of the shares of stock is decided.
The trial court cannot classify the case based on potentialities. The two defendants
in that case are both stockholders on record. They continue to be stockholders until
a decision is rendered on the true ownership of the 25 shares of stock in Santos'
name. If Santos' subscription is declared fictitious and he still insists on inspecting
corporate books and exercising rights incidental to being a stockholder, then, and
only then, shall the case cease to be intra-corporate.
Applying the nature of the controversy test, this is still an intra-corporate dispute. The
Complaint for interpleader seeks a determination of the true owner of the shares of
stock registered in Santos' name. Ultimately, however, the goal is to stop Santos from
inspecting corporate books. This goal is so apparent that, even if Santos is declared
the true owner of the shares of stock upon completion of the interpleader case, Belo
Medical Group still seeks his disqualification from inspecting the corporate books
based on bad faith. Therefore, the controversy shifts from a mere question of
ownership over movable property to the exercise of a registered stockholder's
proprietary right to inspect corporate books.
Belo Medical Group argues that to include inspection of corporate books to the
controversy is premature considering that there is still no determination as to who,
between Belo and Santos, is the rightful owner of the 25 shares of stock. Its actions
belie its arguments. Belo Medical Group wants the trial court not to prematurely
characterize the dispute as intra-corporate when, in the same breath, it prospectively
seeks Santos' perpetual disqualification from inspecting its books. This case was never
about putting into light the ownership of the shares of stock in Santos' name. If that
was a concern at all, it was merely secondary. The primary aim of Belo and Belo
Medical Group was to defeat his right to inspect the corporate books, as can be seen
by the filing of a Supplemental Complaint for declaratory relief.
The circumstances of the case and the aims of the parties must not be taken in
isolation from one another. The totality of the controversy must be taken into account
to improve upon the existing tests. This Court notes that Belo Medical Group used its
Complaint for interpleader as a subterfuge in order to stop Santos, a registered
stockholder, from exercising his right to inspect corporate books.
Belo made no claims to Santos' shares before he attempted to inspect corporate
books, and inquired about the Henares' election as corporate secretary and the
conduct of stockholders' meetings. Even as she claimed Santos' shares as hers, Belo
proffered no initial proof that she had paid for these shares. She failed to produce
any document except her bare allegation that she had done so. Even her Answer Ad
Cautelam with Cross-Claim96 contained bare allegations of ownership.
According to its Complaint, although Belo Medical Group's records reflect Santos as
the registered stockholder of the 25 shares, they did not show that Santos had made
payments to Belo Medical Group for these shares, "consistent with Bela's claim of
ownership over them."97 The absence of any document to establish that Santos had
paid for his shares does not bolster Belo's claim of ownership of the same shares.
Santos remains a stockholder on record until the contrary is shown.
Belo Medical Group cites Lim v. Continental Development Corporation98 as its basis
for filing its Complaint for interpleader. In Lim, Benito Gervasio Tan (Tan) appeared
as a stockholder of Continental Development Corporation. He repeatedly requested
the corporation to issue certificates of shares of stock in his name but Continental
Development Corporation could not do this due to the claims of Zoila Co Lim (Lim).
Lim alleged that her mother, So Bi, was the actual owner of the shares that were
already registered in the corporate books as Lim's, and she delivered these in trust
to Lim before she died. Lim wanted to have the certificates of shares cancelled and
new ones re-issued in his name. This Court ruled that Continental Development
Corporation was correct in filing a case for interpleader:
Since there is an active conflict of interests between the two defendants, now herein
respondent Benito Gervasio Tan and petitioner Zoila Co Lim, over the disputed shares
of stock, the trial court gravely abused its discretion in dismissing the complaint for
interpleader, which practically decided ownership of the shares of stock in favor of
defendant Benito Gervasio Tan. The two defendants, now respondents in G.R. No. L-
41831, should be given full opportunity to litigate their respective claims.
Rule 63, Section 1 of the New Rules of Court tells us when a cause of action exists to
support a complaint in interpleader:
Whenever conflicting claims upon the same subject matter are or may be made
against a person, who claims no interest whatever in the subject matter, or an interest
which in whole or in part is not disputed by the claimants, he may bring an action
against the conflicting claimants to compel them to interplead and litigate their several
claims among themselves . . .
This provision only requires as an indispensable requisite:
that conflicting claims upon the same subject matter are or may be made against the
plaintiff-in-interpleader who claims no interest whatever in the subject matter or an
interest which in whole or in part is not disputed by the claimants (Beltran vs. People's
Homesite and Housing Corporation, No. L-25138, 29 SCRA 145).
This ruling, penned by Mr. Justice Teehankee, reiterated the principle in Alvarez vs.
Commonwealth (65 Phil. 302), that
The action of interpleader, under section 120, is a remedy whereby a person who has
personal property in his possession. or an obligation to render wholly or partially,
without claiming any right in both comes to court and asks that the persons who
claim the said personal property or who consider themselves entitled to demand
compliance with the obligation. be required to litigate among themselves, in order to
determine finally who is entitled to one or the other thing. The remedy is afforded
not to protect a person against a double liability but to protect him against a double
vexation in respect of one liability.
An interpleader merely demands as a sine qua non element
. . . that there be two or more claimants to the fund or thing in dispute through
separate and different interests. The claims must be adverse before relief can be
granted and the parties sought to be interpleaded must be in a position to make
effective claims (33 C.J. 430).
Additionally, the fund thing, or duty over which the parties assert adverse claims must
be one and the same and derived from the same source (33 C.J., 328; Martin, Rules
of Court, 1969 ed., Vol. 3, 133-134; Moran, Rules of Court, 1970 ed., Vol. 3, 134-
136).
Indeed, petitioner corporation is placed in the same situation as a lessee who does
not know the person to whom he will pay the rentals due to the conflicting claims
over t[h]e property leased, or a sheriff who finds himself puzzled by conflicting claims
to a property seized by him. In these examples, the lessee (Pangkalinawan vs. Rodas,
80 Phil. 28) and the sheriff (Sy-Quia vs. Sheriff, 46 Phil. 400) were each allowed to
file a complaint in interpleader to determine the respective rights of the claimants.99
In Lim, the corporation was presented certificates of shares of stock in So Bi's name.
This proof was sufficient for Continental Development Corporation to reasonably
conclude that controversy on ownership of the shares of stock existed.
Furthermore, the controversy in Lim was between a registered stockholder in the
books of the corporation and a stranger who claimed to be the rightful transferee of
the shares of stock of her mother. The relationship of the parties and the
circumstances of the case establish the civil nature of the controversy, which was
plainly, ownership of shares of stock. Interpleader was not filed to evade or defeat a
registered stockholder's right to inspect corporate books. It was borne by the sincere
desire of a corporation, not interested in the certificates of stock to be issued to either
claimant, to eliminate its liability should it favor one over the other.
On the other hand, based on the facts of this case and applying the relationship and
nature of the controversy tests, it was understandable how the trial court could
classify the interpleader case as intra-corporate and dismiss it. There was no
ostensible debate on the ownership of the shares that called for an interpleader case.
The issues and remedies sought have been muddled when, ultimately, at the front
and center of the controversy is a registered stockholder's right to inspect corporate
books.
As an intra-corporate dispute, Santos should not have been allowed to file a Motion
to Dismiss.100 The trial court should have continued on with the case as an intra-
corporate dispute considering that it called for the judgments on the relationship
between a corporation and its two warring stockholders and the relationship of these
two stockholders with each other.
III
Rule 45 is the wrong mode of appeal.
A.M. No. 04-9-07-SC promulgated by this Court En Banc on September 14, 2004 laid
down the rules on modes of appeal m cases formerly cognizable by the Securities and
Exchange Commission:
1. All decisions and final orders in cases falling under the Interim Rules of Corporate
Rehabilitation and the Interim Rules of Procedure Governing Intra-Corporate
Controversies under Republic Act No. 8799 shall be appealable to the Court of Appeals
through a petition for review under Rule 43 of the Rules of Court.
2. The petition for review shall be taken within fifteen (15) days from notice of the
decision or final order of the Regional Trial Court. Upon proper motion and the
payment of the full amount of the legal fee prescribed in Rule 141 as amended before
the expiration of the reglementary period, the Court of Appeals may grant an
additional period of fifteen (15) days within which to file the petition for review. No
further extension shall be granted except for the most compelling reasons and in no
case to exceed fifteen (15) days.
On the other hand, Rule 43 of the Rules of Court allows for appeals to the Court of
Appeals to raise questions of fact, of law, or a mix of both. Hence, a party assailing
a decision or a final order of the trial court acting as a special commercial court, purely
on questions of law, must raise these issues before the Court of Appeals through a
petition for review.101 A.M. No. 04-9-07-SC mandates it. Rule 43 allows it.
Belo Medical Group argues that since it raises only questions of law, the proper mode
of appeal is Rule 45 filed directly to this Court. This is correct assuming there were
no rules specific to intra-corporate disputes. Considering that the controversy was still
classified as intra-corporate upon filing of appeal, special rules, over general ones,
must apply.
Based on the policy of judicial economy and for practical considerations,102 this Court
will not dismiss the case despite the wrong mode of appeal utilized. For one, it would
be taxing in time and resources not just for Belo Medical Group but also for Santos
and Belo to dismiss this case and have them refile their petitions for review before
the Court of Appeals. There would be no benefit to any of the parties to dismiss the
case especially since the issues can already be resolved based n the records before
this Court. Also, the Court of Appeals already referred the matter to this Court when
it dismissed Belo's Petition for Review. Remanding this case to the Court of Appeals
would not only be unprecedented, it would further delay its resolution.
IV
At the outset, this Court notes that two cases were filed by Belo Medical Group: the
Complaint for interpleader and the Supplemental Complaint for Declaratory Relief.
Under Rule 2, Section 5 of the Rules of Court, a joinder of cause of action is allowed,
provided that it follows the conditions enumerated below:
Section 5. Joinder of Causes of Action. A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an
opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of
parties;
(b) The joinder shall not include special civil actions or actions governed by
special rules;
(c) Where the causes of action are between the same parties but pertain to different
venues or jurisdictions, the joinder may be allowed in the Regional Trial Court
provided one of the causes of action falls within the jurisdiction of said court and the
venue lies therein; and
(d) Where the claims in all the causes of action are principally for recovery of money,
the aggregate amount claimed shall be the test of jurisdiction. (Emphasis supplied)
Assuming this case continues on as an interpleader, it cannot be joined with the
Supplemental Complaint for declaratory relief as both are special civil actions.
However, as the case was classified and will continue as an intra-corporate dispute,
the simultaneous complaint for declaratory relief becomes superfluous. The right of
Santos to inspect the books of Belo Medical Group and the appreciation for his motives
to do so will necessarily be determined by the trial court together with determining
the ownership of the shares of stock under Santos' name.
The trial court may make a declaration first on who owns the shares of stock and
suspend its ruling on whether Santos should be allowed to inspect corporate records.
Or, it may rule on whether Santos has the right to inspect corporate books in the
meantime while there has yet to be a resolution on the ownership of shares. Remedies
are available to Belo Medical Group and Belo at any stage of the proceeding, should
they carry on in prohibiting Santos from inspecting the corporate books.
WHEREFORE, the Petition for Review of Belo Medical Group, Inc. is PARTIALLY
GRANTED. The December 8, 2008 Joint Resolution of Branch 149, Regional Trial
Court, Makati City in Civil Case No. 08-397 is REVERSED regarding its dismissal of
the intra-corporate case. Let this case be REMANDED to the commercial court of
origin for further proceedings.

SO ORDERED.