1. Alday v.
FGU Insurance – Commencement of Actions
On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with the Regional Trial
Court of Makati1alleging that petitioner Evangeline K. Alday owed it P114,650.76, representing
unliquidated cash advances, unremitted costs of premiums and other charges incurred by
petitioner in the course of her work as an insurance agent for respondent. 2 Respondent also
prayed for exemplary damages, attorney's fees, and costs of suit. 3Petitioner filed her answer and
by way of counterclaim, asserted her right for the payment of P104,893.45, representing direct
commissions, profit commissions and contingent bonuses earned from 1 July 1986 to 7 December
1986, and for accumulated premium reserves amounting to P500,000.00. In addition, petitioner
prayed for attorney's fees, litigation expenses, moral damages and exemplary damages for the
allegedly unfounded action filed by respondent.4 On 23 August 1989, respondent filed a "Motion
to Strike Out Answer With Compulsory Counterclaim And To Declare Defendant In Default"
because petitioner's answer was allegedly filed out of time. 5However, the trial court denied the
motion on 25 August 1989 and similarly rejected respondent's motion for reconsideration on 12
March 1990.6 A few weeks later, on 11 April 1990, respondent filed a motion to dismiss petitioner's
counterclaim, contending that the trial court never acquired jurisdiction over the same because of
the non-payment of docket fees by petitoner.7 In response, petitioner asked the trial court to
declare her counterclaim as exempt from payment of docket fees since it is compulsory and that
respondent be declared in default for having failed to answer such counterclaim. 8
In its 18 September 1990 Order, the trial court9 granted respondent's motion to dismiss petitioner's
counterclaim and consequently, denied petitioner's motion. The court found petitioner's
counterclaim to be merely permissive in nature and held that petitioner's failure to pay docket fees
prevented the court from acquiring jurisdiction over the same.10The trial court similar denied
petitioner's motion for reconsideration on 28 February 1991.
On 23 December 1998, the Court of Appeals11 sustained the trial court, finding that petitioner's
own admissions, as contained in her answer, show that her counterclaim is merely permissive.
The relevant portion of the appellate court's decision12 is quoted herewith -
Contrary to the protestations of appellant, mere reading of the allegations in the
answer a quo will readily show that her counterclaim can in no way be compulsory. Take
note of the following numbered paragraphs in her answer:
"(14) That, indeed, FGU's cause of action which is not supported by any
document other than the self-serving 'Statement of Account' dated March 28,
1988 x x x
(15) That it should be noted that the cause of action of FGU is not the
enforcement of the Special Agent's Contract but the alleged 'cash
accountabilities which are not based on written agreement x x x.
x x x x
(19) x x x A careful analysis of FGU's three-page complaint will show that its
cause of action is not for specific performance or enforcement of the Special
Agent's Contract rather, it is for the payment of the alleged cash
accountabilities incurred by defendant during the period form [sic] 1975 to
1986 which claim is executory and has not been ratified. It is the established
rule that unenforceable contracts, like this purported money claim of FGU,
cannot be sued upon or enforced unless ratified, thus it is as if they have no
effect. x x x."
To support the heading "Compulsory Counterclaim" in her answer and give the
impression that the counterclaim is compulsory appellant alleged that "FGU has
unjustifiably failed to remit to defendant despite repeated demands in gross violation of
their Special Agent's Contract x x x." The reference to said contract was included
purposely to mislead. While on one hand appellant alleged that appellee's cause of
action had nothing to do with the Special Agent's Contract, on the other hand, she claim
that FGU violated said contract which gives rise of [sic] her cause of action. Clearly,
appellant's cash accountabilities cannot be the offshoot of appellee's alleged violation
of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioner's motion for reconsideration,13 giving rise
to the present petition.
Before going into the substantive issues, the Court shall first dispose of some procedural matters
raised by the parties. Petitioner claims that respondent is estopped from questioning her non-
payment of docket fees because it did not raise this particular issue when it filed its motion - the
"Motion to Strike out Answer With Compulsory Counterclaim And To Declare Defendant In Default"
- with the trial court; rather, it was only nine months after receiving petitioner's answer that
respondent assailed the trial court's lack of jurisdiction over petitioner's counterclaims based on
the latter's failure to pay docket fees.14 Petitioner's position is unmeritorious. Estoppel by laches
arises from the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined to assert it. 15 In
the case at bar, respondent cannot be considered as estopped from assailing the trial court's
jurisdiction over petitioner's counterclaim since this issue was raised by respondent with the trial
court itself - the body where the action is pending - even before the presentation of any evidence
by the parties and definitely, way before any judgment could be rendered by the trial court.
Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the appeal filed by
petitioner from the 18 September 1990 and 28 February 1991 orders of the trial court. It is
significant to note that this objection to the appellate court's jurisdiction is raised for the first time
before this Court; respondent never having raised this issue before the appellate court. Although
the lack of jurisdiction of a court may be raised at any stage of the action, a party may be estopped
from raising such questions if he has actively taken part in the very proceedings which he
questions, belatedly objecting to the court's jurisdiction in the event that the judgment or order
subsequently rendered is adverse to him.16 In this case, respondent actively took part in the
proceedings before the Court of Appeals by filing its appellee's brief with the same. 17 Its
participation, when taken together with its failure to object to the appellate court's jurisdiction
during the entire duration of the proceedings before such court, demonstrates a willingness to
abide by the resolution of the case by such tribunal and accordingly, respondent is now most
decidedly estopped from objecting to the Court of Appeals' assumption of jurisdiction over
petitioner's appeal.18
The basic issue for resolution in this case is whether or not the counterclaim of petitioner is
compulsory or permissive in nature. A compulsory counterclaim is one which, being cognizable by
the regular courts of justice, arises out of or is connected with the transaction or occurrence
constituting the subject matter of the opposing party's claim and does not require for its
adjudication the presence of third parties of whom the court cannot acquire jurisdiction.19
In Valencia v. Court of Appeals,20 this Court capsulized the criteria or tests that may be used in
determining whether a counterclaim is compulsory or permissive, summarized as follows:
1
 1. Are the issues of fact and law raised by the claim and counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory
counterclaim rule?
3. Will substantially the same evidence support or refute plaintiff's claim as well s
defendant's counterclaim?
4. Is there any logical relation between the claim and the counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of Appeals,21 is the
"compelling test of compulsoriness" which requires "a logical relationship between the claim and
counterclaim, that is, where conducting separate trials of the respective claims of the parties would
entail a substantial duplication of effort and time by the parties and the court."
As contained in her answer, petitioner's counterclaims are as follows:
(20) That defendant incorporates and repleads by reference all the foregoing allegations
as may be material to her Counterclaim against FGU.
(21) That FGU is liable to pay the following just, valid and legitimate claims of defendant:
(a) the sum of at least P104,893.45 plus maximum interest thereon
representing, among others, direct commissions, profit commissions and
contingent bonuses legally due to defendant; and
(b) the minimum amount of P500,000.00 plus the maximum allowable interest
representing defendant's accumulated premium reserve for 1985 and
previous years,
which FGU has unjustifiably failed to remit to defendant despite repeated demands in
gross violation of their Special Agent's Contract and in contravention of the principle of
law that "every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith."
(22) That as a result of the filing of this patently baseless, malicious and unjustified
Complaint, and FGU's unlawful, illegal and vindictive termination of their Special Agent's
Contract, defendant was unnecessarily dragged into this litigation and to defense [sic]
her side and assert her rights and claims against FGU, she was compelled to hire the
services of counsel with whom she agreed to pay the amount of P30,000.00 as and for
attorney's fees and stands to incur litigation expenses in the amount estimated to at
least P20,000.00 and for which FGU should be assessed and made liable to pay
defendant.
(23) That considering further the malicious and unwarranted action of defendant in filing
this grossly unfounded action, defendant has suffered and continues to suffer from
serious anxiety, mental anguish, fright and humiliation. In addition to this, defendant's
name, good reputation and business standing in the insurance business as well as in
the community have been besmirched and for which FGU should be adjudged and
made liable to pay moral damages to defendant in the amount of P300,000.00 as
minimum.
(24) That in order to discourage the filing of groundless and malicious suits like FGU's
Complaint, and by way of serving [as] an example for the public good, FGU should be
penalized and assessed exemplary damages in the sum of P100,000.00 or such
amount as the Honorable Court may deem warranted under the circumstances. 22
Tested against the abovementioned standards, petitioner's counterclaim for commissions,
bonuses, and accumulated premium reserves is merely permissive. The evidence required to
prove petitioner's claims differs from that needed to establish respondent's demands for the
recovery of cash accountabilities from petitioner, such as cash advances and costs of premiums.
The recovery of respondent's claims is not contingent or dependent upon establishing petitioner's
counterclaim, such that conducting separate trials will not result in the substantial duplication of
the time and effort of the court and the parties. One would search the records in vain for a logical
connection between the parties' claims. This conclusion is further reinforced by petitioner's own
admissions since she declared in her answer that respondent's cause of action, unlike her own,
was not based upon the Special Agent's Contract. 23 However, petitioner's claims for damages,
allegedly suffered as a result of the filing by respondent of its complaint, are compulsory. 24
There is no need for need for petitioner to pay docket fees for her compulsory counterclaim. 25 On
the other hand, in order for the trial court to acquire jurisdiction over her permissive counterclaim,
petitioner is bound to pay the prescribed docket fees.26 The rule on the payment of filing fees has
been laid down by the Court in the case of Sun Insurance Office, Ltd. V. Hon. Maximiano
Asuncion27-
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that vests a trial court with jurisdiction over the
subject-matter or nature of the action. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the fee
within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
pleading and payment of the prescribed filing fee but, subsequently, the judgment
awards a claim not specified in the pleading, or if specified the same has been left for
determination by the court, the additional filing fee therefor shall constitute a lien on the
judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy
to enforce said lien and assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Susan v.
Court of Appeals.28In Suson, the Court explained that although the payment of the prescribed
docket fees is a jurisdictional requirement, its non-payment does not result in the automatic
dismissal of the case provided the docket fees are paid within the applicable prescriptive or
reglementary period. Coming now to the case at bar, it has not been alleged by respondent and
there is nothing in the records to show that petitioner has attempted to evade the payment of the
proper docket fees for her permissive counterclaim. As a matter of fact, after respondent filed its
motion to dismiss petitioner's counterclaim based on her failure to pay docket fees, petitioner
immediately filed a motion with the trial court, asking it to declare her counterclaim as compulsory
in nature and therefore exempt from docket fees and, in addition, to declare that respondent was
in default for its failure to answer her counterclaim.29However, the trial court dismissed petitioner's
counterclaim. Pursuant to this Court's ruling in Sun Insurance, the trial court should have instead
2
given petitioner a reasonable time, but in no case beyond the applicable prescriptive or
reglementary period, to pay the filing fees for her permissive counterclaim.

Petitioner asserts that the trial court should have declared respondent in default for having failed
to answer her counterclaim.30 Insofar as the permissive counterclaim of petitioner is concerned,
there is obviously no need to file an answer until petitioner has paid the prescribed docket fees for
only then shall the court acquire jurisdiction over such claim. 31 Meanwhile, the compulsory
counterclaim of petitioner for damages based on the filing by respondent of an allegedly unfounded
and malicious suit need not be answered since it is inseparable from the claims of respondent. If
respondent were to answer the compulsory counterclaim of petitioner, it would merely result in the
former pleading the same facts raised in its complaint.32

WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998
and its 19 May 1999 Resolution are hereby MODIFIED. The compulsory counterclaim of petitioner
for damages filed in Civil Case No. 89-3816 is ordered REINSTATED. Meanwhile, the Regional
Trial Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed docket
fees for her permissive counterclaim (direct commissions, profit commissions, contingent bonuses
and accumulated premium reserves), after ascertaining that the applicable prescriptive period has
not yet set in.33

SO ORDERED.

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 2. Korea Technologies v. Lerma – Commencement of Actions
In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in
civil and commercial disputes. Arbitration along with mediation, conciliation, and negotiation, being
inexpensive, speedy and less hostile methods have long been favored by this Court. The petition
before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties
stipulating that they would submit themselves to arbitration in a foreign country. Regrettably,
instead of hastening the resolution of their dispute, the parties wittingly or unwittingly prolonged
the controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in
the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while
private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a Contract 1 whereby KOGIES would set up
an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in the
Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for Contract No. KLP-
970301 dated March 5, 19972 amending the terms of payment. The contract and its amendment
stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG
cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install and initiate the
operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plant’s
production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD
1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease3 with Worth Properties, Inc.
(Worth) for use of Worth’s 5,079-square meter property with a 4,032-square meter warehouse
building to house the LPG manufacturing plant. The monthly rental was PhP 322,560 commencing
on January 1, 1998 with a 10% annual increment clause. Subsequently, the machineries,
equipment, and facilities for the manufacture of LPG cylinders were shipped, delivered, and
installed in the Carmona plant. PGSMC paid KOGIES USD 1,224,000.
However, gleaned from the Certificate4 executed by the parties on January 22, 1998, after the
installation of the plant, the initial operation could not be conducted as PGSMC encountered
financial difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES
would be deemed to have completely complied with the terms and conditions of the March 5, 1997
contract.
For the remaining balance of USD306,000 for the installation and initial operation of the plant,
PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998 for
PhP 4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP 4,500,000.5
When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT
STOPPED." Thus, on May 8, 1998, KOGIES sent a demand letter6 to PGSMC threatening criminal
action for violation of Batas Pambansa Blg.22 in case of nonpayment. On the same date, the wife
of PGSMC’s President faxed a letter dated May 7, 1998 to KOGIES’ President who was then
staying at a Makati City hotel. She complained that not only did KOGIES deliver a different brand
of hydraulic press from that agreed upon but it had not delivered several equipment parts already
paid for.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the
payments were stopped for reasons previously made known to KOGIES. 7
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated
March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the
machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer
the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC
filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S.
No. 98-03813 against Mr. Dae Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally
rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined
violations by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed
upon in Article 15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter
threatening that the machineries, equipment, and facilities installed in the plant would be
dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted an
Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul,
Korea pursuant to Art. 15 of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No.
98-1178 against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC granted
a temporary restraining order (TRO) on July 4, 1998, which was subsequently extended until July
22, 1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that
were stopped were not funded but later on claimed that it stopped payment of the checks for the
reason that "their value was not received" as the former allegedly breached their contract by
"altering the quantity and lowering the quality of the machinery and equipment" installed in the
plant and failed to make the plant operational although it earlier certified to the contrary as shown
in a January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their
Contract, as amended, by unilaterally rescinding the contract without resorting to arbitration.
KOGIES also asked that PGSMC be restrained from dismantling and transferring the machinery
and equipment installed in the plant which the latter threatened to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to
the TRO since Art. 15, the arbitration clause, was null and void for being against public policy as
it ousts the local courts of jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim 9 asserting that it had
the full right to dismantle and transfer the machineries and equipment because it had paid for them
in full as stipulated in the contract; that KOGIES was not entitled to the PhP 9,000,000 covered by
the checks for failing to completely install and make the plant operational; and that KOGIES was
liable for damages amounting to PhP 4,500,000 for altering the quantity and lowering the quality
of the machineries and equipment. Moreover, PGSMC averred that it has already paid PhP
2,257,920 in rent (covering January to July 1998) to Worth and it was not willing to further shoulder
the cost of renting the premises of the plant considering that the LPG cylinder manufacturing plant
never became operational.
After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order denying
the application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD
1,224,000, the value of the machineries and equipment as shown in the contract such that
KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the
Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction
over any dispute that may arise between the parties. KOGIES’ prayer for an injunctive writ was
denied.10 The dispositive portion of the Order stated:
4
 WHEREFORE, in view of the foregoing consideration, this Court believes and so holds
that no cogent reason exists for this Court to grant the writ of preliminary injunction to
restrain and refrain defendant from dismantling the machineries and facilities at the lot
and building of Worth Properties, Incorporated at Carmona, Cavite and transfer the
same to another site: and therefore denies plaintiff’s application for a writ of preliminary
injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. 11 KOGIES
denied it had altered the quantity and lowered the quality of the machinery, equipment, and
facilities it delivered to the plant. It claimed that it had performed all the undertakings under the
contract and had already produced certified samples of LPG cylinders. It averred that whatever
was unfinished was PGSMC’s fault since it failed to procure raw materials due to lack of funds.
KOGIES, relying on Chung Fu Industries (Phils.), Inc. v. Court of Appeals,12 insisted that the
arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum with Motion to Dismiss answering PGSMC’s
13
memorandum of July 22, 1998 and seeking dismissal of PGSMC’s counterclaims, KOGIES, on
August 4, 1998, filed its Motion for Reconsideration14 of the July 23, 1998 Order denying its
application for an injunctive writ claiming that the contract was not merely for machinery and
facilities worth USD 1,224,000 but was for the sale of an "LPG manufacturing plant" consisting of
"supply of all the machinery and facilities" and "transfer of technology" for a total contract price of
USD 1,530,000 such that the dismantling and transfer of the machinery and facilities would result
in the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still
unpaid owner/seller of the plant. Moreover, KOGIES points out that the arbitration clause under
Art. 15 of the Contract as amended was a valid arbitration stipulation under Art. 2044 of the Civil
Code and as held by this Court in Chung Fu Industries (Phils.), Inc.15
In the meantime, PGSMC filed a Motion for Inspection of Things16 to determine whether there was
indeed alteration of the quantity and lowering of quality of the machineries and equipment, and
whether these were properly installed. KOGIES opposed the motion positing that the queries and
issues raised in the motion for inspection fell under the coverage of the arbitration clause in their
contract.
On September 21, 1998, the trial court issued an Order (1) granting PGSMC’s motion for
inspection; (2) denying KOGIES’ motion for reconsideration of the July 23, 1998 RTC Order; and
(3) denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims as these
counterclaims fell within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration17 of the September 21,
1998 RTC Order granting inspection of the plant and denying dismissal of PGSMC’s compulsory
counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent
motion for reconsideration, KOGIES filed before the Court of Appeals (CA) a petition for
certiorari18 docketed as CA-G.R. SP No. 49249, seeking annulment of the July 23, 1998 and
September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus,
and preliminary injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and
transferring the machineries and equipment in the Carmona plant, and to direct the RTC to enforce
the specific agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES’ urgent motion for reconsideration
and directed the Branch Sheriff to proceed with the inspection of the machineries and equipment
in the plant on October 28, 1998.19
Thereafter, KOGIES filed a Supplement to the Petition20 in CA-G.R. SP No. 49249 informing the
CA about the October 19, 1998 RTC Order. It also reiterated its prayer for the issuance of the writs
of prohibition, mandamus and preliminary injunction which was not acted upon by the CA. KOGIES
asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not
the machineries and equipment conformed to the specifications in the contract and were properly
installed.
On November 11, 1998, the Branch Sheriff filed his Sheriff’s Report21 finding that the enumerated
machineries and equipment were not fully and properly installed.
The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision22 affirming the RTC Orders and
dismissing the petition for certiorari filed by KOGIES. The CA found that the RTC did not gravely
abuse its discretion in issuing the assailed July 23, 1998 and September 21, 1998 Orders.
Moreover, the CA reasoned that KOGIES’ contention that the total contract price for USD
1,530,000 was for the whole plant and had not been fully paid was contrary to the finding of the
RTC that PGSMC fully paid the price of USD 1,224,000, which was for all the machineries and
equipment. According to the CA, this determination by the RTC was a factual finding beyond the
ambit of a petition for certiorari.
On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an
arbitration clause which provided for a final determination of the legal rights of the parties to the
contract by arbitration was against public policy.
On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum
shopping by PGSMC, the CA held that the counterclaims of PGSMC were compulsory ones and
payment of docket fees was not required since the Answer with counterclaim was not an initiatory
pleading. For the same reason, the CA said a certificate of non-forum shopping was also not
required.
Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES
did not wait for the resolution of its urgent motion for reconsideration of the September 21, 1998
RTC Order which was the plain, speedy, and adequate remedy available. According to the CA,
the RTC must be given the opportunity to correct any alleged error it has committed, and that since
the assailed orders were interlocutory, these cannot be the subject of a petition for certiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.
The Issues
Petitioner posits that the appellate court committed the following errors:
a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND
FACILITIES AS "A QUESTION OF FACT" "BEYOND THE AMBIT OF A PETITION FOR
CERTIORARI" INTENDED ONLY FOR CORRECTION OF ERRORS OF
JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
(SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL COURT’S
FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION
BELOW;
5
 b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15
OF THE CONTRACT BETWEEN THE PARTIES FOR BEING "CONTRARY TO
PUBLIC POLICY" AND FOR OUSTING THE COURTS OF JURISDICTION;
c. DECREEING PRIVATE RESPONDENT’S COUNTERCLAIMS TO BE ALL
COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM SHOPPING;
d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING
FOR THE RESOLUTION OF THE MOTION FOR RECONSIDERATION OF THE
ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL COURT
AN OPPORTUNITY TO CORRECT ITSELF;
e. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21, 1998
NOT TO BE PROPER SUBJECTS OF CERTIORARI AND PROHIBITION FOR BEING
"INTERLOCUTORY IN NATURE;"
f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC)
PETITION AND, INSTEAD, DISMISSING THE SAME FOR ALLEGEDLY "WITHOUT
MERIT."23
The Court’s Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first tackle the procedural issues.
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket
fees and filed a certificate of non-forum shopping, and that its failure to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with
Compulsory Counterclaim dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997
Revised Rules of Civil Procedure, the rule that was effective at the time the Answer with
Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A compulsory
counterclaim or a cross-claim that a defending party has at the time he files his answer shall be
contained therein."
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against
KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in nature. We
stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No.
04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMC’s Answer is not an initiatory
pleading which requires a certification against forum shopping under Sec. 5 24 of Rule 7, 1997
Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not
commit reversible error in denying KOGIES’ motion to dismiss PGSMC’s compulsory
counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz,25 the CA also pronounced that "certiorari and Prohibition are neither the
remedies to question the propriety of an interlocutory order of the trial court." 26 The CA erred on
its reliance on Gamboa. Gamboa involved the denial of a motion to acquit in a criminal case which
was not assailable in an action for certiorari since the denial of a motion to quash required the
accused to plead and to continue with the trial, and whatever objections the accused had in his
motion to quash can then be used as part of his defense and subsequently can be raised as errors
on his appeal if the judgment of the trial court is adverse to him. The general rule is that
interlocutory orders cannot be challenged by an appeal.27 Thus, in Yamaoka v. Pescarich
Manufacturing Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an adverse
judgment on the merits, incorporating in said appeal the grounds for assailing the
interlocutory orders. Allowing appeals from interlocutory orders would result in the ‘sorry
spectacle’ of a case being subject of a counterproductive ping-pong to and from the
appellate court as often as a trial court is perceived to have made an error in any of its
interlocutory rulings. However, where the assailed interlocutory order was issued with
grave abuse of discretion or patently erroneous and the remedy of appeal would not
afford adequate and expeditious relief, the Court allows certiorari as a mode of
redress.28
Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory
motions. Thus, where the interlocutory order was issued without or in excess of jurisdiction or with
grave abuse of discretion, the remedy is certiorari.29
The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in
the issuance of the two assailed orders coupled with the fact that there is no plain, speedy, and
adequate remedy in the ordinary course of law amply provides the basis for allowing the resort to
a petition for certiorari under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari.
Note that KOGIES’ motion for reconsideration of the July 23, 1998 RTC Order which denied the
issuance of the injunctive writ had already been denied. Thus, KOGIES’ only remedy was to assail
the RTC’s interlocutory order via a petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC
Order relating to the inspection of things, and the allowance of the compulsory counterclaims has
not yet been resolved, the circumstances in this case would allow an exception to the rule that
before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and
said motion should have been first resolved by the court a quo. The reason behind the rule is "to
enable the lower court, in the first instance, to pass upon and correct its mistakes without the
intervention of the higher court."30
The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment,
and facilities when he is not competent and knowledgeable on said matters is evidently flawed
and devoid of any legal support. Moreover, there is an urgent necessity to resolve the issue on
6
the dismantling of the facilities and any further delay would prejudice the interests of KOGIES.
Indeed, there is real and imminent threat of irreparable destruction or substantial damage to
KOGIES’ equipment and machineries. We find the resort to certiorari based on the gravely abusive
orders of the trial court sans the ruling on the October 2, 1998 motion for reconsideration to be
proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It
provides:
Article 15. Arbitration.—All disputes, controversies, or differences which may arise
between the parties, out of or in relation to or in connection with this Contract or for the
breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance with
the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The
award rendered by the arbitration(s) shall be final and binding upon both parties
concerned. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the place where the contract is made
governs. Lex loci contractus. The contract in this case was perfected here in the Philippines.
Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity
of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044
provides, "Any stipulation that the arbitrators’ award or decision shall be final, is valid,
without prejudice to Articles 2038, 2039 and 2040." (Emphasis supplied.)
Arts. 2038,31 2039,32 and 204033 abovecited refer to instances where a compromise or an arbitral
award, as applied to Art. 2044 pursuant to Art. 2043,34 may be voided, rescinded, or annulled, but
these would not denigrate the finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been
shown to be contrary to any law, or against morals, good customs, public order, or public policy.
There has been no showing that the parties have not dealt with each other on equal footing. We
find no reason why the arbitration clause should not be respected and complied with by both
parties. In Gonzales v. Climax Mining Ltd.,35 we held that submission to arbitration is a contract
and that a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract.36 Again in Del Monte Corporation-USA v. Court of Appeals, we
likewise ruled that "[t]he provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract." 37
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in
accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final
and binding, is not contrary to public policy. This Court has sanctioned the validity of arbitration
clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and
Co., Inc.,38 this Court had occasion to rule that an arbitration clause to resolve differences and
breaches of mutually agreed contractual terms is valid. In BF Corporation v. Court of Appeals, we
held that "[i]n this jurisdiction, arbitration has been held valid and constitutional. Even before the
approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement
of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New Civil
Code’s provisions on arbitration."39 And in LM Power Engineering Corporation v. Capitol Industrial
Construction Groups, Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling disputes, arbitration––
along with mediation, conciliation and negotiation––is encouraged by the Supreme
Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of
disputes, especially of the commercial kind. It is thus regarded as the "wave of the
future" in international civil and commercial disputes. Brushing aside a contractual
agreement calling for arbitration between the parties would be a step backward.
Consistent with the above-mentioned policy of encouraging alternative dispute
resolution methods, courts should liberally construe arbitration clauses. Provided such
clause is susceptible of an interpretation that covers the asserted dispute, an order to
arbitrate should be granted. Any doubt should be resolved in favor of arbitration. 40
Having said that the instant arbitration clause is not against public policy, we come to the question
on what governs an arbitration clause specifying that in case of any dispute arising from the
contract, an arbitral panel will be constituted in a foreign country and the arbitration rules of the
foreign country would govern and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law
to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising
from contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration
rules of our domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules
of the UNCITRAL Model Law on International Commercial Arbitration41 of the United Nations
Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21,
1985, the Philippines committed itself to be bound by the Model Law. We have even incorporated
the Model Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution,
and for Other Purposes, promulgated on April 2, 2004. Secs. 19 and 20 of Chapter 4 of the Model
Law are the pertinent provisions:
CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION
SEC. 19. Adoption of the Model Law on International Commercial Arbitration.––
International commercial arbitration shall be governed by the Model Law on
International Commercial Arbitration (the "Model Law") adopted by the United Nations
Commission on International Trade Law on June 21, 1985 (United Nations Document
A/40/17) and recommended for enactment by the General Assembly in Resolution No.
40/72 approved on December 11, 1985, copy of which is hereto attached as Appendix
"A".
SEC. 20. Interpretation of Model Law.––In interpreting the Model Law, regard shall be
had to its international origin and to the need for uniformity in its interpretation and resort
may be made to the travaux preparatoriesand the report of the Secretary General of the
United Nations Commission on International Trade Law dated March 25, 1985 entitled,
"International Commercial Arbitration: Analytical Commentary on Draft Trade identified
by reference number A/CN. 9/264."
7
While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a
procedural law which has a retroactive effect. Likewise, KOGIES filed its application for arbitration
before the KCAB on July 1, 1998 and it is still pending because no arbitral award has yet been
rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule that procedural
laws are construed to be applicable to actions pending and undetermined at the time of their
passage, and are deemed retroactive in that sense and to that extent. As a general rule, the
retroactive application of procedural laws does not violate any personal rights because no vested
right has yet attached nor arisen from them.42
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law
are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of
arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such cases,
thus:
SEC. 24. Referral to Arbitration.––A court before which an action is brought in a matter
which is the subject matter of an arbitration agreement shall, if at least one party so
requests not later than the pre-trial conference, or upon the request of both parties
thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is
null and void, inoperative or incapable of being performed.
(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final
and binding are not immediately enforceable or cannot be implemented immediately. Sec. 3543 of
the UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a
competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided for. RA 9285 incorporated these
provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.––The New York Convention shall
govern the recognition and enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional
Trial Court in accordance with the rules of procedure to be promulgated by the
Supreme Court. Said procedural rules shall provide that the party relying on the award
or applying for its enforcement shall file with the court the original or authenticated copy
of the award and the arbitration agreement. If the award or agreement is not made in
any of the official languages, the party shall supply a duly certified translation thereof
into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was
made in party to the New York Convention.
xxxx
SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the
New York Convention.––The recognition and enforcement of foreign arbitral awards not
covered by the New York Convention shall be done in accordance with procedural rules
to be promulgated by the Supreme Court. The Court may, on grounds of comity and
reciprocity, recognize and enforce a non-convention award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.––A foreign arbitral award when
confirmed by a court of a foreign country, shall be recognized and enforced as a foreign
arbitral award and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced
in the same manner as final and executory decisions of courts of law of the Philippines
xxxx
SEC. 47. Venue and Jurisdiction.––Proceedings for recognition and enforcement of an
arbitration agreement or for vacations, setting aside, correction or modification of an
arbitral award, and any application with a court for arbitration assistance and supervision
shall be deemed as special proceedings and shall be filed with the Regional Trial Court
(i) where arbitration proceedings are conducted; (ii) where the asset to be attached or
levied upon, or the act to be enjoined is located; (iii) where any of the parties to the
dispute resides or has his place of business; or (iv) in the National Judicial Capital
Region, at the option of the applicant.
SEC. 48. Notice of Proceeding to Parties.––In a special proceeding for recognition and
enforcement of an arbitral award, the Court shall send notice to the parties at their
address of record in the arbitration, or if any part cannot be served notice at such
address, at such party’s last known address. The notice shall be sent al least fifteen
(15) days before the date set for the initial hearing of the application.
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a
judgment of a foreign court but as a foreign arbitral award, and when confirmed, are enforced as
final and executory decisions of our courts of law.
Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments
or awards given by some of our quasi-judicial bodies, like the National Labor Relations
Commission and Mines Adjudication Board, whose final judgments are stipulated to be final and
binding, but not immediately executory in the sense that they may still be judicially reviewed, upon
the instance of any party. Therefore, the final foreign arbitral awards are similarly situated in that
they need first to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority
and jurisdiction to set aside, reject, or vacate a foreign arbitral award on grounds provided under
Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention.––The New York Convention shall
govern the recognition and enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional
Trial Court in accordance with the rules of procedure to be promulgated by the
Supreme Court. Said procedural rules shall provide that the party relying on the award
8
 or applying for its enforcement shall file with the court the original or authenticated copy
of the award and the arbitration agreement. If the award or agreement is not made in
any of the official languages, the party shall supply a duly certified translation thereof
into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was
made is party to the New York Convention.
If the application for rejection or suspension of enforcement of an award has been made,
the Regional Trial Court may, if it considers it proper, vacate its decision and may also,
on the application of the party claiming recognition or enforcement of the award, order
the party to provide appropriate security.
xxxx
SEC. 45. Rejection of a Foreign Arbitral Award.––A party to a foreign arbitration
proceeding may oppose an application for recognition and enforcement of the arbitral
award in accordance with the procedures and rules to be promulgated by the Supreme
Court only on those grounds enumerated under Article V of the New York Convention.
Any other ground raised shall be disregarded by the Regional Trial Court.
Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually
agreed upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC
which can set aside, reject, or vacate it. In this sense, what this Court held in Chung Fu Industries
(Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final
and binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and
without exceptions as they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear
that all arbitral awards, whether domestic or foreign, are subject to judicial review on specific
grounds provided for.
(4) Grounds for judicial review different in domestic and foreign arbitral awards
The differences between a final arbitral award from an international or foreign arbitral tribunal and
an award given by a local arbitral tribunal are the specific grounds or conditions that vest
jurisdiction over our courts to review the awards.
For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds
for setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the
UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23
of RA 87644 and shall be recognized as final and executory decisions of the RTC,45 they may only
be assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876. 46
(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in
cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus:
SEC. 46. Appeal from Court Decision or Arbitral Awards.—A decision of the Regional
Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award
may be appealed to the Court of Appeals in accordance with the rules and procedure
to be promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court confirming an arbitral award
shall be required by the appellate court to post a counterbond executed in favor of the
prevailing party equal to the amount of the award in accordance with the rules to be
promulgated by the Supreme Court.
Thereafter, the CA decision may further be appealed or reviewed before this Court through a
petition for review under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration
as it bound itself through the subject contract. While it may have misgivings on the foreign
arbitration done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are
duly protected by the law which requires that the arbitral award that may be rendered by KCAB
must be confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an arbitration clause,
stipulating that the arbitral award is final and binding, does not oust our courts of jurisdiction as
the international arbitral award, the award of which is not absolute and without exceptions, is still
judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA
as applied and incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject Contract which provides that the parties
may dispense with the arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject contract is valid and binding on the parties,
and not contrary to public policy; consequently, being bound to the contract of arbitration, a party
may not unilaterally rescind or terminate the contract for whatever cause without first resorting to
arbitration.
What this Court held in University of the Philippines v. De Los Angeles 47 and reiterated in
succeeding cases,48 that the act of treating a contract as rescinded on account of infractions by
the other contracting party is valid albeit provisional as it can be judicially assailed, is not applicable
to the instant case on account of a valid stipulation on arbitration. Where an arbitration clause in
a contract is availing, neither of the parties can unilaterally treat the contract as rescinded since
whatever infractions or breaches by a party or differences arising from the contract must be
brought first and resolved by arbitration, and not through an extrajudicial rescission or judicial
action.
The issues arising from the contract between PGSMC and KOGIES on whether the equipment
and machineries delivered and installed were properly installed and operational in the plant in
Carmona, Cavite; the ownership of equipment and payment of the contract price; and whether
there was substantial compliance by KOGIES in the production of the samples, given the alleged
fact that PGSMC could not supply the raw materials required to produce the sample LPG cylinders,
are matters proper for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an
Application for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as
amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.
9
Corollarily, the trial court gravely abused its discretion in granting PGSMC’s Motion for Inspection (b) The following rules on interim or provisional relief shall be observed:
of Things on September 21, 1998, as the subject matter of the motion is under the primary
jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.
Any party may request that provisional relief be granted against the adverse party.

In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the
Such relief may be granted:
inspection made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no
worth as said Sheriff is not technically competent to ascertain the actual status of the equipment
and machineries as installed in the plant. (i) to prevent irreparable loss or injury;

For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the (ii) to provide security for the performance of any obligation;
grant of the inspection of the equipment and machineries have to be recalled and nullified.
(iii) to produce or preserve any evidence; or
Issue on ownership of plant proper for arbitration
(iv) to compel any other appropriate act or omission.
Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price
of USD 1,530,000 was for the whole plant and its installation is beyond the ambit of a Petition for
(c) The order granting provisional relief may be conditioned upon the provision of
Certiorari.
security or any act or omission specified in the order.

Petitioner’s position is untenable.

It is settled that questions of fact cannot be raised in an original action for certiorari. 49 Whether or
not there was full payment for the machineries and equipment and installation is indeed a factual
issue prohibited by Rule 65.
(d) Interim or provisional relief is requested by written application transmitted by
reasonable means to the Court or arbitral tribunal as the case may be and the party
against whom the relief is sought, describing in appropriate detail the precise relief, the
party against whom the relief is requested, the grounds for the relief, and the evidence
supporting the request.

However, what appears to constitute a grave abuse of discretion is the order of the RTC in (e) The order shall be binding upon the parties.
resolving the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the
RTC which has jurisdiction and authority over the said issue. The RTC’s determination of such
factual issue constitutes grave abuse of discretion and must be reversed and set aside. (f) Either party may apply with the Court for assistance in implementing or enforcing an
interim measure ordered by an arbitral tribunal.

RTC has interim jurisdiction to protect the rights of the parties

(g) A party who does not comply with the order shall be liable for all damages resulting
from noncompliance, including all expenses, and reasonable attorney's fees, paid in
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for obtaining the order’s judicial enforcement. (Emphasis ours.)
PGSMC to dismantle and transfer the equipment and machineries, we find it to be in order
considering the factual milieu of the instant case.
Art. 17(2) of the UNCITRAL Model Law on ICA defines an "interim measure" of protection as:

Firstly, while the issue of the proper installation of the equipment and machineries might well be
under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 Article 17. Power of arbitral tribunal to order interim measures
has jurisdiction to hear and grant interim measures to protect vested rights of the parties. Sec. 28
pertinently provides: xxx xxx xxx

SEC. 28. Grant of interim Measure of Protection.—(a) It is not incompatible with an
arbitration agreement for a party to request, before constitution of the tribunal,
from a Court to grant such measure. After constitution of the arbitral tribunal and
during arbitral proceedings, a request for an interim measure of protection, or
modification thereof, may be made with the arbitral or to the extent that the arbitral
tribunal has no power to act or is unable to act effectivity, the request may be
made with the Court. The arbitral tribunal is deemed constituted when the sole
arbitrator or the third arbitrator, who has been nominated, has accepted the nomination
and written communication of said nomination and acceptance has been received by
the party making the request.
(2) An interim measure is any temporary measure, whether in the form of an award or
in another form, by which, at any time prior to the issuance of the award by which the
dispute is finally decided, the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause,
current or imminent harm or prejudice to the arbitral process itself;

10
 (c) Provide a means of preserving assets out of which a subsequent award may be
satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.
Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based
on the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before
the KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides, by
our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause
of its contract with KOGIES.

Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim
PGSMC to preserve the subject equipment and machineries
measures:

Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim measure in relation to arbitration
proceedings, irrespective of whether their place is in the territory of this State, as it has
in relation to proceedings in courts. The court shall exercise such power in accordance
with its own procedures in consideration of the specific features of international
arbitration.
Finally, while PGSMC may have been granted the right to dismantle and transfer the subject
equipment and machineries, it does not have the right to convey or dispose of the same
considering the pending arbitral proceedings to settle the differences of the parties. PGSMC
therefore must preserve and maintain the subject equipment and machineries with the diligence
of a good father of a family51 until final resolution of the arbitral proceedings and enforcement of
the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:

In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit
(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;
that even "the pendency of an arbitral proceeding does not foreclose resort to the courts for
provisional reliefs." We explicated this way:
(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117
are REVERSED and SET ASIDE;
As a fundamental point, the pendency of arbitral proceedings does not foreclose resort
to the courts for provisional reliefs. The Rules of the ICC, which governs the parties’
arbitral dispute, allows the application of a party to a judicial authority for interim or (3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and
conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The differences arising from the subject Contract before the KCAB; and
Arbitration Law) recognizes the rights of any party to petition the court to take measures
to safeguard and/or conserve any matter which is the subject of the dispute in
(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it
arbitration. In addition, R.A. 9285, otherwise known as the "Alternative Dispute
had not done so, and ORDERED to preserve and maintain them until the finality of whatever
Resolution Act of 2004," allows the filing of provisional or interim measures with the
arbitral award is given in the arbitration proceedings.
regular courts whenever the arbitral tribunal has no power to act or to act effectively. 50

No pronouncement as to costs.
It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of
protection.
SO ORDERED.
Secondly, considering that the equipment and machineries are in the possession of PGSMC, it
has the right to protect and preserve the equipment and machineries in the best way it can.
Considering that the LPG plant was non-operational, PGSMC has the right to dismantle and
transfer the equipment and machineries either for their protection and preservation or for the better
way to make good use of them which is ineluctably within the management discretion of PGSMC.

Thirdly, and of greater import is the reason that maintaining the equipment and machineries in
Worth’s property is not to the best interest of PGSMC due to the prohibitive rent while the LPG
plant as set-up is not operational. PGSMC was losing PhP322,560 as monthly rentals or
PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the
plant.

Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the
preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight,
the July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given
the non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of
protection to PGSMC which would otherwise been irreparably damaged.

11
 3. Mercado v. CA – Commencement of Actions
This is a petition to review a decision of the Court of Appeals, which condemned petitioner to pay
P2,000 as moral damages and P50 for medical expenses, for a physical injury caused by the son
of petitioner, Augusto Mercado, on a classmate, Manuel Quisumbing, Jr., both pupils of the
Lourdes Catholic School, Kanlaon, Quezon City. The case had originated in the Court of First
Instance of Manila, Hon. Bienvenido A. Tan, presiding, which dismissed the complaint filed by
Manuel Quisumbing, Jr. and his father against petitioner, father of the above-mentioned Mercado.
The facts found by the Court of Appeals are as follows:
Plaintiff-appellant Manuel Quisumbing, Jr. is the son of his co-plaintiff-appellants Ana
Pineda and Manuel L. Quisumbing, while Augusto Mercado is the son of defendant-
appellee Ciriaco L. Mercado, Manuel Quisumbing, Jr. and Augusto Mercado were
classmates in the Lourdes Catholic School on Kanlaon, Quezon City. A "pitogo", which
figures prominently in this case, may be described as an empty nutshell used by children
as a piggy bank. On February 22, 1956, Augusto Mercado and Manuel Quisumbing, Jr.
quarrelled over a "pitogo". As a result, Augusto wounded Manuel, Jr. on the right cheek
with a piece of razor.
xxx xxx xxx
The facts of record clearly show that it was Augusto Mercado who started the
aggression. Undeniably, the "pitogo" belonged to Augusto Mercado but he lent it to
Benedicto P. Lim and in turn Benedicto lent it to Renato Legaspi. Renato was not aware
that the "pitogo" belonged to Augusto, because right after Benedicto gave it to him,
Benedicto ran away to get a basket ball with which they could play. Manuel Quisumbing,
Jr. was likewise unaware that the "pitogo" belonged to Augusto. He thought it was the
"pitogo" of Benedicto P. Lim, so that when Augusto attempted to get the "pitogo" from
Renato, Manuel, Jr. told him not to do so because Renato was better at putting the chain
into the holes of the "pitogo". However, Augusto resented Manuel, Jr.'s remark and he
aggresively pushed the latter. The fight started then. After Augusto gave successive
blows to Manuel, Jr., and the latter was clutching his stomach which bore the brunt of
Augusto's anger, Augusto seeing that Manuel, Jr. was in a helpless position, cut him on
the right check with a piece of razor.
xxx xxx xxx
Although the doctor who treated Manuel Quisumbing, Jr., Antonio B. Past, testified for
plaintiffs-appellants, he did not declare as to the amount of fees he collected from
plaintiff-appellants for the treatment of Manuel, Jr. the child was not even hospitalized
for the wound. We believe that the sum of P50.00 is a fair approximation of the medical
expenses incurred by plaintiffs-appellants.
xxx xxx xxx
The damages specified in paragraphs C and D of the aforequoted portion of plaintiffs-
appellant's complaint come under the class of moral damages. The evidence of record
shows that the child suffered moral damages by reason of the wound inflicted by
Augusto Mercado. Though such kind of damages cannot be fully appreciated in terms
of money, we believe that the sum of P2,000.00 would fully compensate the child.
As second cause of action, plaintiffs-appellants pray for P5,000.00 covering the moral
damages they allegedly suffered due to their son's being wounded; and the sum of
P3,000.00 as attorney's fees. The facts of record do not warrant the granting of moral
damages to plaintiffs-appellants Manuel Quisumbing and Ana Pineda. "In law mental
anguish is restricted, as a rule, to such mental pain or suffering as arises from an injury
or wrong to the person himself, as distinguished from that form of mental suffering which
is the accompaniment of sympathy or sorrow for another's suffering of which arises from
a contemplation of wrong committed on the person of another. Pursuant to the rule
stated, a husband or wife cannot recover for mental suffering caused by his or her
sympathy for the other's suffering. Nor can a parent recover for mental distress and
anxiety on account of physical injury sustained by a child or for anxiety for the safety of
his child placed in peril by the negligence of another." (15 Am. Jur. 597). Plaintiffs-
appellants are not entitled to attorney's fees, it not appearing that defendant-appellee
had wantonly disregarded their claim for damages.
In the first, second and third assignments of error, counsel for petitioner argues that since the
incident of the inflicting of the wound on respondent occurred in a Catholic School (during recess
time), through no fault of the father, petitioner herein, the teacher or head of the school should be
held responsible instead of the latter. This precise question was brought before this Court
in Exconde vs. Capuno and Capuno, 101 Phil., 843, but we held, through Mr. Justice Bautista:
We find merit in this claim. It is true that under the law above-quoted, "teachers or
directors of arts and trades are liable for any damage caused by their pupils or
apprentices while they are under their custody", but this provision only applies to an
institution of arts and trades and not to any academic educational institution (Padilla,
Civil Law, 1953 Ed., Vol. IV, p. 841; See 12 Manresa, 4th Ed., p. 557)
The last paragraph of Article 2180 of the Civil Code, upon which petitioner rests his claim that the
school where his son was studying should be made liable, is as follows:
ART. 2180. . . .
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain in
their custody.
It would be seem that the clause "so long as they remain in their custody," contemplates a situation
where the pupil lives and boards with the teacher, such that the control, direction and influence on
the pupil supersedes those of the parents. In these circumstances the control or influence over
the conduct and actions of the pupil would pass from the father and mother to the teacher; and so
would the responsibility for the torts of the pupil. Such a situation does not appear in the case at
bar; the pupils appear to go to school during school hours and go back to their homes with their
parents after school is over. The situation contemplated in the last paragraph of Article 2180 does
not apply, nor does paragraph 2 of said article, which makes father or mother responsible for the
damages caused by their minor children. The claim of petitioner that responsibility should pass to
the school must, therefore, be held to be without merit.
We next come to the claim of petitioner that the moral damages fixed at P2,000 are excessive.
We note that the wound caused to respondent was inflicted in the course of an ordinary or common
fight between boys in a grade school. The Court of Appeals fixed the medical expenses incurred
in treating and curing the wound at P50. Said court stated that the wound did not even require
hospitalization. Neither was Mercado found guilty of any offense nor the scar in Quisumbing's face
pronounced to have caused a deformity, unlike the case of Araneta, et al. vs. Arreglado, et al.,
12
104 Phil., 529; 55 Off. Gaz. (9) 1561. Petitioner's counsel argues that if death call for P3,000 to
P6,000, certainly the incised wound could cause mental pain and suffering to the tune of P2,000.

In the decision of the Court of Appeals, said court pronounces that the child Quisumbing suffered
moral damages "by reason of the wound inflicted by Augusto Mercado." While moral damages
included physical suffering, which must have been caused to the wounded boy Quisumbing (Art.
2217, Civil Code), the decision of the court below does not declare that any of the cases specified
in Article 2219 of the Civil Code in which moral damages may be recovered, has attended or
occasioned the physical injury. The only possible circumstance in the case at bar in which moral
damages are recoverable would be if a criminal offense or a quasi-delict has been committed.

It does not appear that a criminal action for physical injuries was ever presented. The offender,
Augusto Mercado, was nine years old and it does not appear that he had acted with discernment
when he inflicted the physical injuries on Manuel Quisumbing, Jr.

It is possible that the Court of Appeals may have considered Augusto Mercado responsible for or
guilty, of a quasi-delict causing physical injuries, within the meaning of paragraph 2 of Article 2219.
Even if we assume that said court considered Mercado guilty of a quasi-delict when it imposed the
moral damages, yet the facts found by said court indicate that Augusto's resentment, which
motivated the assault, was occasioned by the fact that Manuel, Jr. had tried to intervene in or
interfere with the attempt of Mercado to get "his pitogo from Renato." This is, according to the
decision appealed from, the reason why Mercado was incensed and pushed Quisumbing who, in
turn, also pushed Mercado. It is, therefore, apparent that the proximate cause of the injury caused
to Quisumbing was Quisumbing's own fault or negligence for having interfered with Mercado while
trying to get the pitogo from another boy. (Art. 2179, Civil Code.)

After considering all the facts as found by the Court of Appeals, we find that none of the cases
mentioned in Article 2219 of the Civil Code, which authorizes the grant of moral damages, was
shown to have existed. Consequently, the grant of moral damages is not justified.

For the foregoing considerations, the decision appealed from is hereby reversed and the petitioner
is declared exempt or free from the payment of moral damages. The award of P50 for medical
expenses, however, is hereby affirmed. Without costs.

13
 4. Proton Pilipinas vs Banque Nationale de Paris – Commencement of Actions
It appears that sometime in 1995, petitioner Proton Pilipinas Corporation (Proton) availed of the
credit facilities of herein respondent, Banque Nationale de Paris (BNP). To guarantee the payment
of its obligation, its co-petitioners Automotive Corporation Philippines (Automotive), Asea One
Corporation (Asea) and Autocorp Group (Autocorp) executed a corporate guarantee [2] to the
extent of US$2,000,000.00. BNP and Proton subsequently entered into three trust receipt
agreements dated June 4, 1996,[3] January 14, 1997,[4] and April 24, 1997.[5]
Under the terms of the trust receipt agreements, Proton would receive imported passenger motor
vehicles and hold them in trust for BNP. Proton would be free to sell the vehicles subject to the
condition that it would deliver the proceeds of the sale to BNP, to be applied to its obligations to it.
In case the vehicles are not sold, Proton would return them to BNP, together with all the
accompanying documents of title.
+ 209,268.00
3,486.00
P 352,116.30 - Total fees paid by the plaintiff
To the complaint, the defendants-herein petitioners filed on October 12, 1998 a Motion to
Dismiss[9] on the ground that BNP failed to pay the correct docket fees to thus prevent the trial
court from acquiring jurisdiction over the case.[10] As additional ground, petitioners raised
prematurity of the complaint, BNP not having priorly sent any demand letter. [11]
By Order[12] of August 3, 1999, Branch 148 of the Makati RTC denied petitioners' Motion to
Dismiss, viz:
Resolving the first ground relied upon by the defendant, this court believes and so hold that the
docket fees were properly paid. It is the Office of the Clerk of Court of this station that computes
the correct docket fees, and it is their duty to assess the docket fees correctly, which they did.

Allegedly, Proton failed to deliver the proceeds of the sale and return the unsold motor vehicles. Even granting arguendo that the docket fees were not properly paid, the court cannot just dismiss
the case. The Court has not yet ordered (and it will not in this case) to pay the correct docket fees,
Pursuant to the corporate guarantee, BNP demanded from Automotive, Asea and Autocorp the thus the Motion to dismiss is premature, aside from being without any legal basis.
payment of the amount of US$1,544,984.40[6] representing Proton's total outstanding obligations.
These guarantors refused to pay, however. Hence, BNP filed on September 7, 1998 before the As held in the case of National Steel Corporation vs. CA, G.R. No. 123215, February 2, 1999, the
Makati Regional Trial Court (RTC) a complaint against petitioners praying that they be ordered to Supreme Court said:
pay (1) US$1,544,984.40 plus accrued interest and other related charges thereon subsequent to
August 15, 1998 until fully paid and (2) an amount equivalent to 5% of all sums due from petitioners x x x
as attorney's fees. Although the payment of the proper docket fees is a jurisdictional requirement, the trial court may
allow the plaintiff in an action to pay the same within a reasonable time within the expiration of
The Makati RTC Clerk of Court assessed the docket fees which BNP paid at P352,116.30[7] which applicable prescription or reglementary period. If the plaintiff fails to comply with this requirement,
was computed as follows:[8] the defendant should timely raise the issue of jurisdiction or else he would be considered in
estoppel. In the latter case, the balance between appropriate docket fees and the amount actually
First Cause of Action -- $ 844,674.07 paid by the plaintiff will be considered a lien or (sic) any award he may obtain in his favor.
Second Cause of Action -- 171,120.53 As to the second ground relied upon by the defendants, in that a review of all annexes to the
Third Cause of Action -- 529,189.80 complaint of the plaintiff reveals that there is not a single formal demand letter for defendants to
$1,544,984.40 fulfill the terms and conditions of the three (3) trust agreements.
5% as Attorney's Fee $ 77,249.22
TOTAL $1,622,233.62 In this regard, the court cannot sustain the submission of defendant. As correctly pointed out by
Conversion rate to peso x 43 the plaintiff, failure to make a formal demand for the debtor to pay the plaintiff is not among the
TOTAL P69,756,000.00(roundoff) legal grounds for the dismissal of the case. Anyway, in the appreciation of the court, this is simply
evidentiary.
Computation based on Rule 141:
x x x
COURT JDF
WHEREFORE, for lack of merit, the Motion to Dismiss interposed by the defendants is hereby
P 69,756,000.00 P 69,606.000.00 DENIED.[13](Underscoring supplied)
150,000.00 x .003 Petitioners filed a motion for reconsideration[14] of the denial of their Motion to Dismiss, but it was
69,606,000.00 208,818.00 denied by the trial court by Order[15] of October 3, 2000.
x 002 + 450.00
139,212..00 P 209,268.00 Petitioners thereupon brought the case on certiorari and mandamus [16] to the Court of Appeals
150.00 which, by Decision[17] of July 25, 2001, denied it in this wise:
P 139,362.00
… Section 7(a) of Rule 141 of the Rules of Court excludes interest accruing from the principal
amount being claimed in the pleading in the computation of the prescribed filing fees. The
LEGAL : P 139,362.00 complaint was submitted for the computation of the filing fee to the Office of the Clerk of Court of
+ 209,268.00 the Regional Trial Court of Makati City which made an assessment that respondent paid
P348,630.00 x 1% = P3,486.30 accordingly. What the Office of the Clerk of Court did and the ruling of the respondent Judge
find support in the decisions of the Supreme Court in Ng Soon vs. Alday and Tacay vs. RTC of
P 139,362.00 Tagum, Davao del Norte. In the latter case, the Supreme Court explicitly ruled that "where the
action is purely for recovery of money or damages, the docket fees are assessed on the basis of
14
the aggregate amount claimed, exclusive only of interests and costs." MUNICIPAL TRIAL COURTS, MUNICIPAL CIRCUIT TRIAL COURTS,
SHARI'A DISTRICT COURTS;AND THE INTEGRATED BAR OF THE
Assuming arguendo that the correct filing fees was not made, the rule is that the court may allow PHILIPPINES
a reasonable time for the payment of the prescribed fees, or the balance thereof, and upon such ALL COMPLAINTS MUST SPECIFY AMOUNT OF DAMAGES SOUGHT NOT
payment, the defect is cured and the court may properly take cognizance of the action unless in ONLY IN THE BODY OF THE PLEADING, BUT ALSO IN THE PRAYER IN
the meantime prescription has set in and consequently barred the right of action. Here respondent ORDER TO BE ACCEPTED AND ADMITTED FOR FILING. THE AMOUNT OF
SUBJECT:
Judge did not make any finding, and rightly so, that the filing fee paid by private respondent was DAMAGES SO SPECIFIED IN THE COMPLAINT SHALL BE THE BASIS FOR
insufficient. ASSESSING THE AMOUNT OF THE FILING FEES.

On the issue of the correct dollar-peso rate of exchange, the Office of the Clerk of Court of the In Manchester Development Corporation vs. Court of Appeals, No. L-75919, May 7, 1987, 149
RTC of Makati pegged it at P 43.21 to US$1. In the absence of any office guide of the rate of SCRA 562, this Court condemned the practice of counsel who in filing the original complaint
exchange which said court functionary was duty bound to follow, the rate he applied is omitted from the prayer any specification of the amount of damages although the amount of over
presumptively correct. P78 million is alleged in the body of the complaint. This Court observed that "(T)his is clearly
intended for no other purpose than to evade the payment of the correct filing fees if not to mislead
Respondent Judge correctly ruled that the matter of demand letter is evidentiary and does not the docket clerk, in the assessment of the filing fee. This fraudulent practice was compounded
form part of the required allegations in a complaint. Section 1, Rule 8 of the 1997 Rules of Civil when, even as this Court had taken cognizance of the anomaly and ordered an investigation,
Procedure pertinently provides: petitioner through another counsel filed an amended complaint, deleting all mention of the amount
of damages being asked for in the body of the complaint. xxx"
"Every pleading shall contain in a methodical and logical form, a plain, concise and direct
statement of the ultimate facts on which the party pleading relies for his claim or defense, as the For the guidance of all concerned, the WARNING given by the court in the afore-cited case is
case may be, omitted the statement of mere evidentiary facts." reproduced hereunder:
Judging from the allegations of the complaint particularly paragraphs 6, 12, 18, and 23 where
allegations of imputed demands were made upon the defendants to fulfill their respective "The Court serves warning that it will take drastic action upon a repetition of this unethical practice.
obligations, annexing the demand letters for the purpose of putting up a sufficient cause of action
is not required. To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar
pleadings should specify the amount of damages being prayed for not only in the body of
In fine, respondent Judge committed no grave abuse of discretion amounting to lack or excess of the pleading but also in the prayer, and said damages shall be considered in the
jurisdiction to warrant certiorari and mandamus.[18] (Underscoring supplied) assessment of the filing fees in any case. Any pleading that fails to comply with this
Their Motion for Reconsideration[19] having been denied by the Court of Appeals,[20] petitioners requirement shall not be accepted nor admitted, or shall otherwise be expunged from the
filed the present petition for review on certiorari[21] and pray for the following reliefs: record.

WHEREFORE, in view of all the foregoing, it is most respectfully prayed of this Honorable Court The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee.
to grant the instant petition by REVERSING and SETTING ASIDE the questioned Decision of July An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court,
25, 2001 and the Resolution of December 18, 2001 for being contrary to law, to Administrative much less the payment of the docket fee based on the amount sought in the amended pleading.
Circular No. 11-94 and Circular No. 7 and instead direct the court a quo to require Private The ruling in the Magaspi case (115 SCRA 193) in so far as it is inconsistent with this
Respondent Banque to pay the correct docket fee pursuant to the correct exchange rate of the pronouncement is overturned and reversed."
dollar to the peso on September 7, 1998 and to quantify its claims for interests on the principal
obligations in the first, second and third causes of actions in its Complaint in Civil Case No. 98- Strict compliance with this Circular is hereby enjoined.
2180.[22] (Underscoring supplied) Let this be circularized to all the courts hereinabove named and to the President and Board of
Citing Administrative Circular No. 11-94,[23] petitioners argue that BNP failed to pay the correct Governors of the Integrated Bar of the Philippines, which is hereby directed to disseminate this
docket fees as the said circular provides that in the assessment thereof, interest claimed should Circular to all its members.
be included. There being an underpayment of the docket fees, petitioners conclude, the trial court
did not acquire jurisdiction over the case. March 24, 1988.

Additionally, petitioners point out that the clerk of court, in converting BNP's claims from US dollars (Sgd). CLAUDIO TEEHANKEE
to Philippine pesos, applied the wrong exchange rate of US $1 = P43.00, the exchange rate on Chief Justice
September 7, 1998 when the complaint was filed having been pegged at US $1 = P43.21. Thus,
by petitioners' computation, BNP's claim as of August 15, 1998 was actually (Emphasis and underscoring supplied)
P70,096,714.72,[24] not P69,756,045.66. On the other hand, respondent maintains that it had paid the filing fee which was assessed by the
clerk of court, and that there was no violation of Supreme Court Circular No. 7 because the amount
Furthermore, petitioners submit that pursuant to Supreme Court Circular No. 7, [25] the complaint of damages was clearly specified in the prayer, to wit:
should have been dismissed for failure to specify the amount of interest in the prayer.

Circular No. 7 reads:

5. On the FIRST CAUSE OF ACTION
JUDGES AND CLERKS OF COURT OF THE COURT OF TAX APPEALS,
TO: (c) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS EIGHT
REGIONAL TRIAL COURTS, METROPOLITAN TRIAL COURTS IN CITIES,
15
 HUNDRED FORTY FOUR THOUSAND SIX HUNDRED SEVENTY FOUR AND 6. P 60,000.00 or more but less than P 80,000.00 …... 160.00
SEVEN CENTS (US$ 844,674.07), plus accrued interests and other related charges 7. P 80,000.00 or more but less than P 150,000.00 ….. 200.00
thereon subsequent to August 15, 1998, until fully paid; and (ii) an amount equivalent 8. And for each P 1,000.00 in excess of P 150,000.00 .. 4.00
to 5% of all sums due from said Defendant, as and for attorney's fees; 9. When the value of the case cannot be estimated … 400.00
10. When the case does not concern property (naturalization, adoption, legal
64.00
6. On the SECOND CAUSE OF ACTION separation, etc.) ..……...

(d) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS ONE HUNDRED If the case concerns real estate, the assessed value thereof shall be considered in computing the
TWENTY AND FIFTY THREE CENTS (US$171,120.53), plus accrued interests and fees.
other related charges thereon subsequent to August 15, 1998 until fully paid; and (ii) an
amount equivalent to 5% of all sums due from said Defendant, as and for attorney's In case the value of the property or estate or the sum claim is less or more in accordance with the
fees; appraisal of the court, the difference of fees shall be refunded or paid as the case may be.
When the complaint in this case was filed in 1998, however, as correctly pointed out by petitioners,
7. On the THIRD CAUSE OF ACTION Rule 141 had been amended by Administrative Circular No. 11-94[29] which provides:

(e) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS FIVE
HUNDRED TWENTY NINE THOUSAND ONE HUNDRED EIGHTY NINE AND EIGHTY
CENTS (US$529,189.80), plus accrued interests and other related charges thereon
subsequent to August 15, 1998 until fully paid; and (ii) an amount equivalent to 5% or
all sums due from said Defendant, as and for attorney's fees;
BY RESOLUTION OF THE COURT, DATED JUNE 28, 1994, PURSUANT TO SECTION 5 (5) OF
ARTICLE VIII OF THE CONSTITUTION, RULE 141, SECTION 7 (a) AND (d), and SECTION 8
(a) and (b) OF THE RULES OF COURT ARE HEREBY AMENDED TO READ AS FOLLOWS:
RULE 141

8. On ALL THE CAUSES OF ACTION LEGAL FEES

Defendants AUTOMOTIVE CORPORATION PHILIPPINES, ASEA ONE x x x

CORPORATION and AUTOCORP GROUP to be ordered to pay Plaintiff BNP the
aggregate sum of (i) US DOLLARS ONE MILLION FIVE HUNDRED FORTY FOUR Sec. 7. Clerks of Regional Trial Courts
THOUSAND NINE HUNDRED EIGHTY FOUR AND FORTY CENTS
(US$1,544,984.40) (First through Third Causes of Action), plus accrued interest and (a) For filing an action or a permissive counterclaim or money claim against an estate not based
other related charges thereon subsequent to August 15, 1998 until fully paid; and (ii) an on judgment, or for filing with leave of court a third-party, fourth-party, etc. complaint, or a
amount equivalent to 5% of all sums due from said Defendants, as and for attorney's complaint in intervention, and for all clerical services in the same, if the total sum claimed, inclusive
fees.[26] of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs, or the stated
value of the property in litigation, is:
Moreover, respondent posits that the amount of US$1,544,984.40 represents not only the principal
1. Not more than P 100,000.00 ……... P 400.00
but also interest and other related charges which had accrued as of August 15, 1998. Respondent
goes even further by suggesting that in light of Tacay v. Regional Trial Court of Tagum, Davao del 2. P 100,000.00, or more but not more than P 150,000.00 …
600.00
Norte[27] where the Supreme Court held,
3. For each P 1,000.00 in excess of P 150,000.00 ………….
5.00
Where the action is purely for the recovery of money or damages, the docket fees are assessed on
x x x
the basis of the aggregate amount claimed, exclusive only of interests and
costs.[28] (Emphasis and underscoring supplied),
Sec. 8. Clerks of Metropolitan and Municipal Trial Courts
it made an overpayment.
(a) For each civil action or proceeding, where the value of the subject matter involved, or the
When Tacay was decided in 1989, the pertinent rule applicable was Section 5 (a) of Rule 141
amount of the demand, inclusive of interest, damages or whatever kind, attorney's fees, litigation
which provided for the following:
expenses, and costs, is:
SEC. 5. Clerks of Regional Trial Courts. (a) For filing an action or proceeding, or a permissive 1. Not more than P 20,000.00 ………
P120.00
counter-claim or cross-claim not arising out of the same transaction subject of the complaint, a
2. More than P 20,000.00 but not more than P 100,000.00
third-party complaint and a complaint in intervention and for all services in the same, if the sum
…. 400.00
claimed, exclusive of interest, of the value of the property in litigation, or the value of the estate,
3. More than P 100,000.00 but not more than P 200,000.00
is:
… 850.00
1. Less than P 5,000.00.……… P 32.00
(Emphasis and underscoring supplied)
2. P 5,000.00 or more but less than P 10,000.00 …….. 48.00
The clerk of court should thus have assessed the filing fee by taking into consideration "the total
3. P 10,000.00 or more but less than P 20,000.00 …… 64.00
sum claimed, inclusive of interest, damages of whatever kind, attorney's fees, litigation expenses,
4. P 20,000.00 or more but less than P 40,000.00 ….... 80.00
and costs, or the stated value of the property in litigation." Respondent's and the Court of Appeals'
5. P 40,000.00 or more but less than P 60,000.00 …… 120.00
reliance then on Tacay was not in order.
16
 original complaint but also in the filing of the second amended complaint.
Neither was, for the same reason, the Court of Appeals' reliance on the 1989 case of Ng Soon v.
Alday,[30] where this Court held: However, in Manchester, petitioner did not pay any additional docket fee until the case was
decided by this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on
…The failure to state the rate of interest demanded was not fatal not only because it is the the government, this Court held that the court a quo did not acquire jurisdiction over the
Courts which ultimately fix the same, but also because Rule 141, Section 5(a) of the Rules case and that the amended complaint could not have been admitted inasmuch as the
of Court, itemizing the filing fees, speaks of "the sum claimed, exclusive of interest." This original complaint was null and void.
clearly implies that the specification of the interest rate is not that indispensable.
In the present case, a more liberal interpretation of the rules is called for considering
Factually, therefore, not everything was left to "guesswork" as respondent Judge has opined. The that,unlike Manchester, private respondent demonstrated his willingness to abide by the
sums claimed were ascertainable, sufficient enough to allow a computation pursuant to Rule 141, rules by paying the additional docket fees as required. The promulgation of the decision
section 5(a). in Manchester must have had that sobering influence on private respondent who thus paid the
additional docket fee as ordered by the respondent court. It triggered his change of stance by
Furthermore, contrary to the position taken by respondent Judge, the amounts claimed need manifesting his willingness to pay such additional docket fee as may be ordered.
not be initially stated with mathematical precision. The same Rule 141, section 5(a) (3rd
paragraph), allows an appraisal "more or less."[31] Thus: Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering
the total amount of the claim. This is a matter which the clerk of court of the lower court and/or his
"In case the value of the property or estate or the sum claimed is less or more in accordance with duly authorized docket clerk or clerk in charge should determine and, thereafter, if any amount is
the appraisal of the court, the difference of fee shall be refunded or paid as the case may be." found due, he must require the private respondent to pay the same.

In other words, a final determination is still to be made by the Court, and the fees ultimately found Thus, the Court rules as follows:
to be payable will either be additionally paid by the party concerned or refunded to him, as the
case may be. The above provision clearly allows an initial payment of the filing fees corresponding
to the estimated amount of the claim subject to adjustment as to what later may be proved.
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that vests a trial court with jurisdiction over the
". . . there is merit in petitioner's claim that the third paragraph of Rule 141, Section 5(a) clearly
subject-matter or nature of the action. Where the filing of the initiatory pleading is not
contemplates a situation where an amount is alleged or claimed in the complaint but is less or
accompanied by payment of the docket fee, the court may allow payment of the fee
more than what is later proved. If what is proved is less than what was claimed, then a refund will
within a reasonable time but in no case beyond the applicable prescriptive or
be made; if more, additional fees will be exacted. Otherwise stated, what is subject to adjustment
reglementary period.
is the difference in the fee and not the whole amount" (Pilipinas Shell Petroleum Corp., et als., vs.
Court of Appeals, et als., G.R. No. 76119, April 10, 1989). [32] (Emphasis and underscoring
2. The same rule applies to permissive counterclaims, third-party claims and similar
supplied)
pleadings, which shall not be considered filed until and unless the filing fee prescribed
Respecting the Court of Appeals' conclusion that the clerk of court did not err when he applied the
therefor is paid. The court may also allow payment of said fee within a reasonable time
exchange rate of US $1 = P43.00 "[i]n the absence of any office guide of the rate of exchange
but also in no case beyond its applicable prescriptive or reglementary period.
which said court functionary was duty bound to follow,[hence,] the rate he applied is presumptively
correct," the same does not lie. The presumption of regularity of the clerk of court's application of
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
the exchange rate is not conclusive.[33] It is disputable.[34] As such, the presumption may be
pleading and payment of the prescribed filing fee but, subsequently, the judgment
overturned by the requisite rebutting evidence.[35] In the case at bar, petitioners have adequately
awards a claim not specified in the pleading, or if specified the same has been left for
proven with documentary evidence[36] that the exchange rate when the complaint was filed on
determination by the court, the additional filing fee therefor shall constitute a lien on the
September 7, 1998 was US $1 = P43.21.
judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy
to enforce said lien and assess and collect the additional fee. [40] (Emphasis and
In fine, the docket fees paid by respondent were insufficient.
underscoring supplied)
With respect to petitioner's argument that the trial court did not acquire jurisdiction over the case
in light of the insufficient docket fees, the same does not lie. The ruling in Sun Insurance Office was echoed in the 2005 case of Heirs of Bertuldo Hinog v. Hon.
Achilles Melicor:[41]
[37]
True, in Manchester Development Corporation v. Court of Appeals, this Court held that the court
acquires jurisdiction over any case only upon the payment of the prescribed docket fees, [38] hence, Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-
it concluded that the trial court did not acquire jurisdiction over the case. payment at the time of filing does not automatically cause the dismissal of the case, as long as
the fee is paid within the applicable prescriptive or reglementary period, more so when the party
It bears emphasis, however, that the ruling in Manchester was clarified in Sun Insurance Office, involved demonstrates a willingness to abide by the rules prescribing such payment. Thus, when
Ltd. (SIOL) v. Asuncion[39] when this Court held that in the former there was clearly an effort to insufficient filing fees were initially paid by the plaintiffs and there was no intention to
defraud the government in avoiding to pay the correct docket fees, whereas in the latter the plaintiff defraud the government, the Manchester rule does not apply. (Emphasis and underscoring
demonstrated his willingness to abide by paying the additional fees as required. supplied; citations omitted)
In the case at bar, respondent merely relied on the assessment made by the clerk of court which
The principle in Manchester could very well be applied in the present case. The pattern and the turned out to be incorrect. Under the circumstances, the clerk of court has the responsibility of
intent to defraud the government of the docket fee due it is obvious not only in the filing of the reassessing what respondent must pay within the prescriptive period, failing which the complaint
17
merits dismissal.

Parenthetically, in the complaint, respondent prayed for "accrued interest… subsequent to August
15, 1998 until fully paid." The complaint having been filed on September 7, 1998, respondent's
claim includes the interest from August 16, 1998 until such date of filing.

Respondent did not, however, pay the filing fee corresponding to its claim for interest from August
16, 1998 until the filing of the complaint on September 7, 1998. As priorly discussed, this is
required under Rule 141, as amended by Administrative Circular No. 11-94, which was the rule
applicable at the time. Thus, as the complaint currently stands, respondent cannot claim the
interest from August 16, 1998 until September 7, 1998, unless respondent is allowed by motion to
amend its complaint within a reasonable time and specify the precise amount of interest petitioners
owe from August 16, 1998 to September 7, 1998[42] and pay the corresponding docket fee therefor.

With respect to the interest accruing after the filing of the complaint, the same can only be
determined after a final judgment has been handed down. Respondent cannot thus be made to
pay the corresponding docket fee therefor. Pursuant, however, to Section 2, Rule 141, as
amended by Administrative Circular No. 11-94, respondent should be made to pay additional fees
which shall constitute a lien in the event the trial court adjudges that it is entitled to interest accruing
after the filing of the complaint.

Sec. 2. Fees as lien. Where the court in its final judgment awards a claim not alleged, or a relief
different or more than that claimed in the pleading, the party concerned shall pay the additional
fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court
shall assess and collect the corresponding fees.
In Ayala Corporation v. Madayag,[43] in interpreting the third rule laid down in Sun Insurance
regarding awards of claims not specified in the pleading, this Court held that the same refers only
to damages arising after the filing of the complaint or similar pleading as to which the
additional filing fee therefor shall constitute a lien on the judgment.

… The amount of any claim for damages, therefore, arising on or before the filing of the complaint
or any pleading should be specified. While it is true that the determination of certain damages as
exemplary or corrective damages is left to the sound discretion of the court, it is the duty of the
parties claiming such damages to specify the amount sought on the basis of which the court may
make a proper determination, and for the proper assessment of the appropriate docket fees. The
exception contemplated as to claims not specified or to claims although specified are left for
determination of the court is limited only to any damages that may arise after the filing of the
complaint or similar pleading for then it will not be possible for the claimant to specify nor speculate
as to the amount thereof.[44] (Emphasis and underscoring supplied; citation omitted)
WHEREFORE, the petition is GRANTED in part. The July 25, 2001 Decision and the December
18, 2001 Resolution of the Court Appeals are hereby MODIFIED. The Clerk of Court of the
Regional Trial Court of Makati City is ordered to reassess and determine the docket fees that
should be paid by respondent, BNP, in accordance with the Decision of this Court, and direct
respondent to pay the same within fifteen (15) days, provided the applicable prescriptive or
reglementary period has not yet expired. Thereafter, the trial court is ordered to proceed with the
case with utmost dispatch.

SO ORDERED.

18
 5. Ruby Shelter Builders vs Formaran – Commencement of Actions
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
the reversal of the Decision1 dated 22 November 2006 of the Court of Appeals in CA-G.R. SP No.
94800. The Court of Appeals, in its assailed Decision, affirmed the Order2 dated 24 March 2006
of the Regional Trial Court (RTC), Branch 22, of Naga City, in Civil Case No. RTC-2006-0030,
ordering petitioner Ruby Shelter Builders and Realty Development Corporation to pay additional
docket/filing fees, computed based on Section 7(a) of Rule 141 of the Rules of Court, as amended.
The present Petition arose from the following facts:
Petitioner obtained a loan3 in the total amount of ₱95,700,620.00 from respondents Romeo Y. Tan
(Tan) and Roberto L. Obiedo (Obiedo), secured by real estate mortgages over five parcels of land,
all located in Triangulo, Naga City, covered by Transfer Certificates of Title (TCTs) No. 38376, 4 No.
29918,5 No. 38374,6 No. 39232,7 and No. 39225,8 issued by the Registry of Deeds for Naga City,
in the name of petitioner. When petitioner was unable to pay the loan when it became due and
demandable, respondents Tan and Obiedo agreed to an extension of the same.
In a Memorandum of Agreement9 dated 17 March 2005, respondents Tan and Obiedo granted
petitioner until 31 December 2005 to settle its indebtedness, and condoned the interests, penalties
and surcharges accruing thereon from 1 October 2004 to 31 December 2005 which amounted to
₱74,678,647.00. The Memorandum of Agreement required, in turn, that petitioner execute
simultaneously with the said Memorandum, "by way of dacion en pago," Deeds of Absolute Sale
in favor of respondents Tan and Obiedo, covering the same parcels of land subject of the
mortgages. The Deeds of Absolute Sale would be uniformly dated 2 January 2006, and state that
petitioner sold to respondents Tan and Obiedo the parcels of land for the following purchase
prices:
TCT No. Purchase Price
38376 ₱ 9,340,000.00
29918 ₱ 28,000,000.00
38374 ₱ 12,000,000.00
39232 ₱ 1,600,000.00
39225 ₱ 1,600,000.00
Petitioner could choose to pay off its indebtedness with individual or all five parcels of land; or it
could redeem said properties by paying respondents Tan and Obiedo the following prices for the
same, inclusive of interest and penalties:
TCT No. Redemption Price
38376 ₱ 25,328,939.00
29918 ₱ 35,660,800.00
38374 ₱ 28,477,600.00
39232 ₱ 6,233,381.00
39225 ₱ 6,233,381.00
In the event that petitioner is able to redeem any of the afore-mentioned parcels of land, the Deed
of Absolute Sale covering the said property shall be nullified and have no force and effect; and
respondents Tan and Obiedo shall then return the owner’s duplicate of the corresponding TCT to
petitioner and also execute a Deed of Discharge of Mortgage. However, if petitioner is unable to
redeem the parcels of land within the period agreed upon, respondents Tan and Obiedo could
already present the Deeds of Absolute Sale covering the same to the Office of the Register of
Deeds for Naga City so respondents Tan and Obiedo could acquire TCTs to the said properties
in their names.
The Memorandum of Agreement further provided that should petitioner contest, judicially or
otherwise, any act, transaction, or event related to or necessarily connected with the said
Memorandum and the Deeds of Absolute Sale involving the five parcels of land, it would pay
respondents Tan and Obiedo ₱10,000,000.00 as liquidated damages inclusive of costs and
attorney’s fees. Petitioner would likewise pay respondents Tan and Obiedo the condoned
interests, surcharges and penalties.10 Finally, should a contest arise from the Memorandum of
Agreement, Mr. Ruben Sia (Sia), President of petitioner corporation, personally assumes, jointly
and severally with petitioner, the latter’s monetary obligation to respondent Tan and Obiedo.
Respondent Atty. Tomas A. Reyes (Reyes) was the Notary Public who notarized the Memorandum
of Agreement dated 17 March 2005 between respondent Tan and Obiedo, on one hand, and
petitioner, on the other.
Pursuant to the Memorandum of Agreement, petitioner, represented by Mr. Sia, executed
separate Deeds of Absolute Sale,11 over the five parcels of land, in favor of respondents Tan and
Obiedo. On the blank spaces provided for in the said Deeds, somebody wrote the 3 rd of January
2006 as the date of their execution. The Deeds were again notarized by respondent Atty. Reyes
also on 3 January 2006.
Without payment having been made by petitioner on 31 December 2005, respondents Tan and
Obiedo presented the Deeds of Absolute Sale dated 3 January 2006 before the Register of Deeds
of Naga City on 8 March 2006, as a result of which, they were able to secure TCTs over the five
parcels of land in their names.
On 16 March 2006, petitioner filed before the RTC a Complaint 12 against respondents Tan,
Obiedo, and Atty. Reyes, for declaration of nullity of deeds of sales and damages, with prayer for
the issuance of a writ of preliminary injunction and/or temporary restraining order (TRO). The
Complaint was docketed as Civil Case No. 2006-0030.
On the basis of the facts already recounted above, petitioner raised two causes of action in its
Complaint.
As for the first cause of action, petitioner alleged that as early as 27 December 2005, its President
already wrote a letter informing respondents Tan and Obiedo of the intention of petitioner to pay
its loan and requesting a meeting to compute the final amount due. The parties held meetings on
3 and 4 January 2006 but they failed to arrive at a mutually acceptable computation of the final
19
amount of loan payable. Respondents Tan and Obiedo then refused the request of petitioner for
further dialogues. Unbeknownst to petitioner, despite the ongoing meetings, respondents Tan and
Obiedo, in evident bad faith, already had the pre-executed Deeds of Absolute Sale notarized on
3 January 2006 by respondent Atty. Reyes. Atty. Reyes, in connivance with respondents Tan and
Obiedo, falsely made it appear in the Deeds of Absolute Sale that Mr. Sia had personally
acknowledged/ratified the said Deeds before Atty. Reyes.
Asserting that the Deeds of Absolute Sale over the five parcels of land were executed merely as
security for the payment of its loan to respondents Tan and Obiedo; that the Deeds of Absolute
Sale, executed in accordance with the Memorandum of Agreement, constituted pactum
commisorium and as such, were null and void; and that the acknowledgment in the Deeds of
Absolute Sale were falsified, petitioner averred:
13. That by reason of the fraudulent actions by the [herein respondents], [herein petitioner] is
prejudiced and is now in danger of being deprived, physically and legally, of the mortgaged
properties without benefit of legal processes such as the remedy of foreclosure and its attendant
procedures, solemnities and remedies available to a mortgagor, while [petitioner] is desirous and
willing to pay its obligation and have the mortgaged properties released. 13
In support of its second cause of action, petitioner narrated in its Complaint that on 18 January
2006, respondents Tan and Obiedo forcibly took over, with the use of armed men, possession of
the five parcels of land subject of the falsified Deeds of Absolute Sale and fenced the said
properties with barbed wire. Beginning 3 March 2006, respondents Tan and Obiedo started
demolishing some of the commercial spaces standing on the parcels of land in question which
were being rented out by petitioner. Respondents Tan and Obiedo were also about to tear down
a principal improvement on the properties consisting of a steel-and-concrete structure housing a
motor vehicle terminal operated by petitioner. The actions of respondents Tan and Obiedo were
to the damage and prejudice of petitioner and its tenants/lessees. Petitioner, alone, claimed to
have suffered at least ₱300,000.00 in actual damages by reason of the physical invasion by
respondents Tan and Obiedo and their armed goons of the five parcels of land.
Ultimately, petitioner’s prayer in its Complaint reads:
WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that
upon the filing of this complaint, a 72-hour temporary restraining order be forthwith issued ex parte:
(a) Restraining [herein respondents] Tan and Obiedo, their agents, privies or
representatives, from committing act/s tending to alienate the mortgaged properties
from the [herein petitioner] pending the resolution of the case, including but not limited
to the acts complained of in paragraph "14", above;
(b) Restraining the Register of Deeds of Naga City from entertaining moves by the
[respondents] to have [petitioner’s] certificates of title to the mortgaged properties
cancelled and changed/registered in [respondents] Tan’s and Obiedo’s names, and/or
released to them;
(c) After notice and hearing, that a writ of preliminary injunction be issued imposing the
same restraints indicated in the next preceding two paragraphs of this prayer; and
(d) After trial, judgment be rendered:
1. Making the injunction permanent;
2. Declaring the provision in the Memorandum of Agreement requiring the
[petitioner] to execute deed of sales (sic) in favor of the [respondents Tan and
Obiedo] as dacion en pago in the event of non-payment of the debt as pactum
commissorium;
3. Annulling the Deed[s] of Sale for TCT Nos. 29918, 38374, 38376, 39225
and 39232, all dated January 3, 2006, the same being in contravention of law;
4. Ordering the [respondents] jointly and solidarily to pay the [petitioner] actual
damages of at least ₱300,000.00; attorney’s fees in the amount of
₱100,000.00 plus P1,000.00 per court attendance of counsel as appearance
fee; litigation expenses in the amount of at least ₱10,000.00 and exemplary
damages in the amount of ₱300,000.00, plus the costs.
[Petitioner] further prays for such other reliefs as may be proper, just and equitable under the
premises.14
Upon filing its Complaint with the RTC on 16 March 2006, petitioner paid the sum of ₱13,644.25
for docket and other legal fees, as assessed by the Office of the Clerk of Court. The Clerk of Court
initially considered Civil Case No. 2006-0030 as an action incapable of pecuniary estimation and
computed the docket and other legal fees due thereon according to Section 7(b)(1), Rule 141 of
the Rules of Court.
Only respondent Tan filed an Answer15 to the Complaint of petitioner. Respondent Tan did admit
that meetings were held with Mr. Sia, as the representative of petitioner, to thresh out Mr. Sia’s
charge that the computation by respondents Tan and Obiedo of the interests, surcharges and
penalties accruing on the loan of petitioner was replete with errors and uncertainties. However,
Mr. Sia failed to back up his accusation of errors and uncertainties and to present his own final
computation of the amount due. Disappointed and exasperated, respondents Tan and Obiedo
informed Mr. Sia that they had already asked respondent Atty. Reyes to come over to notarize the
Deeds of Absolute Sale. Respondent Atty. Reyes asked Mr. Sia whether it was his signature
appearing above his printed name on the Deeds of Absolute Sale, to which Mr. Sia replied yes.
On 4 January 2006, Mr. Sia still failed to establish his claim of errors and uncertainties in the
computation of the total amount which petitioner must pay respondent Tan and Obiedo. Mr. Sia,
instead, sought a nine-month extension for paying the loan obligation of petitioner and the
reduction of the interest rate thereon to only one percent (1%) per month. Respondents Tan and
Obiedo rejected both demands.
Respondent Tan maintained that the Deeds of Absolute Sale were not executed merely as
securities for the loan of petitioner. The Deeds of Absolute Sale over the five parcels of land were
the consideration for the payment of the total indebtedness of petitioner to respondents Tan and
Obiedo, and the condonation of the 15-month interest which already accrued on the loan, while
providing petitioner with the golden opportunity to still redeem all or even portions of the properties
covered by said Deeds. Unfortunately, petitioner failed to exercise its right to redeem any of the
said properties.
Belying that they forcibly took possession of the five parcels of land, respondent Tan alleged that
it was Mr. Sia who, with the aid of armed men, on board a Sports Utility Vehicle and a truck,
rammed into the personnel of respondents Tan and Obiedo causing melee and disturbance.
Moreover, by the execution of the Deeds of Absolute Sale, the properties subject thereof were,
ipso jure, delivered to respondents Tan and Obiedo. The demolition of the existing structures on
the properties was nothing but an exercise of dominion by respondents Tan and Obiedo.
20
Respondent Tan, thus, sought not just the dismissal of the Complaint of petitioner, but also the
grant of his counterclaim. The prayer in his Answer is faithfully reproduced below:
Wherefore, premises considered, it is most respectfully prayed that, after due hearing, judgment
be rendered dismissing the complaint, and on the counterclaim, [herein petitioner] and Ruben Sia,
be ordered to indemnify, jointly and severally [herein respondents Tan and Obiedo] the amounts
of not less than ₱10,000,000.00 as liquidated damages and the further sum of not less than
₱500,000.00 as attorney’s fees. In the alternative, and should it become necessary, it is hereby
prayed that [petitioner] be ordered to pay herein [respondents Tan and Obiedo] the entire principal
loan of ₱95,700,620.00, plus interests, surcharges and penalties computed from March 17, 2005
until the entire sum is fully paid, including the amount of ₱74,678,647.00 foregone interest covering
the period from October 1, 2004 to December 31, 2005 or for a total of fifteen (15) months, plus
incidental expenses as may be proved in court, in the event that Annexes "G" to "L" be nullified.
Other relief and remedies as are just and equitable under the premises are hereby prayed for. 16
Thereafter, respondent Tan filed before the RTC an Omnibus Motion in which he contended that
Civil Case No. 2006-0030 involved real properties, the docket fees for which should be computed
in accordance with Section 7(a), not Section 7(b)(1), of Rule 141 of the Rules of Court, as amended
by A.M. No. 04-2-04-SC which took effect on 16 August 2004. Since petitioner did not pay the
appropriate docket fees for Civil Case No. 2006-0030, the RTC did not acquire jurisdiction over
the said case. Hence, respondent Tan asked the RTC to issue an order requiring petitioner to pay
the correct and accurate docket fees pursuant to Section 7(a), Rule 141 of the Rules of Court, as
amended; and should petitioner fail to do so, to deny and dismiss the prayer of petitioner for the
annulment of the Deeds of Absolute Sale for having been executed in contravention of the law or
of the Memorandum of Agreement as pactum commisorium.
As required by the RTC, the parties submitted their Position Papers on the matter. On 24 March
2006, the RTC issued an Order17 granting respondent Tan’s Omnibus Motion. In holding that both
petitioner and respondent Tan must pay docket fees in accordance with Section 7(a), Rule 141 of
the Rules of Court, as amended, the RTC reasoned:
It must be noted that under paragraph (b) 2. of the said Section 7, it is provided that QUIETING
OF TITLE which is an action classified as beyond pecuniary estimation "shall be governed by
paragraph (a)". Hence, the filing fee in an action for Declaration of Nullity of Deed which is also
classified as beyond pecuniary estimation, must be computed based on the provision of Section
7(A) herein-above, in part, quoted.
Since [herein respondent], Romeo Tan in his Answer has a counterclaim against the plaintiff, the
former must likewise pay the necessary filling (sic) fees as provided for under Section 7 (A) of
Amended Administrative Circular No. 35-2004 issued by the Supreme Court.18
Consequently, the RTC decreed on the matter of docket/filing fees:
WHEREFORE, premises considered, the [herein petitioner] is hereby ordered to pay additional
filing fee and the [herein respondent], Romeo Tan is also ordered to pay docket and filing fees on
his counterclaim, both computed based on Section 7(a) of the Supreme Court Amended
Administrative Circular No. 35-2004 within fifteen (15) days from receipt of this Order to the Clerk
of Court, Regional Trial Court, Naga City and for the latter to compute and to collect the said fees
accordingly.19
Petitioner moved20 for the partial reconsideration of the 24 March 2006 Order of the RTC, arguing
that Civil Case No. 2006-0030 was principally for the annulment of the Deeds of Absolute Sale
and, as such, incapable of pecuniary estimation. Petitioner submitted that the RTC erred in
applying Section 7(a), Rule 141 of the Rules of Court, as amended, to petitioner’s first cause of
action in its Complaint in Civil Case No. 2006-0030.
In its Order21 dated 29 March 2006, the RTC refused to reconsider its 24 March 2006 Order, based
on the following ratiocination:
Analyzing, the action herein pertains to real property, for as admitted by the [herein petitioner],
"the deeds of sale in question pertain to real property" x x x. The Deeds of Sale subject of the
instant case have already been transferred in the name of the [herein respondents Tan and
Obiedo].
Compared with Quieting of Title, the latter action is brought when there is cloud on the title to real
property or any interest therein or to prevent a cloud from being cast upon title to the real property
(Art. 476, Civil Code of the Philippines) and the plaintiff must have legal or equitable title to or
interest in the real property which is the subject matter of the action (Art. 447, ibid.), and yet plaintiff
in QUIETING OF TITLE is required to pay the fees in accordance with paragraph (a) of Section 7
of the said Amended Administrative Circular No. 35-2004, hence, with more reason that the
[petitioner] who no longer has title to the real properties subject of the instant case must be
required to pay the required fees in accordance with Section 7(a) of the Amended Administrative
Circular No. 35-2004 afore-mentioned.
Furthermore, while [petitioner] claims that the action for declaration of nullity of deed of sale and
memorandum of agreement is one incapable of pecuniary estimation, however, as argued by the
[respondent Tan], the issue as to how much filing and docket fees should be paid was never raised
as an issue in the case of Russell vs. Vestil, 304 SCRA 738.
xxxx
WHEREFORE, the Motion for Partial Reconsideration is hereby DENIED.22
In a letter dated 19 April 2006, the RTC Clerk of Court computed, upon the request of counsel for
the petitioner, the additional docket fees petitioner must pay for in Civil Case No. 2006-0030 as
directed in the afore-mentioned RTC Orders. Per the computation of the RTC Clerk of Court, after
excluding the amount petitioner previously paid on 16 March 2006, petitioner must still pay the
amount of ₱720,392.60 as docket fees.23
Petitioner, however, had not yet conceded, and it filed a Petition for Certiorari with the Court of
Appeals; the petition was docketed as CA-G.R. SP No. 94800. According to petitioner, the
RTC24 acted with grave abuse of discretion, amounting to lack or excess of jurisdiction, when it
issued its Orders dated 24 March 2006 and 29 March 2006 mandating that the docket/filing fees
for Civil Case No. 2006-0030, an action for annulment of deeds of sale, be assessed under Section
7(a), Rule 141 of the Rules of Court, as amended. If the Orders would not be revoked, corrected,
or rectified, petitioner would suffer grave injustice and irreparable damage.
On 22 November 2006, the Court of Appeals promulgated its Decision wherein it held that:
Clearly, the petitioner’s complaint involves not only the annulment of the deeds of sale, but also
the recovery of the real properties identified in the said documents. In other words, the objectives
of the petitioner in filing the complaint were to cancel the deeds of sale and ultimately, to recover
possession of the same. It is therefore a real action.
21
Consequently, the additional docket fees that must be paid cannot be assessed in accordance
with Section 7(b). As a real action, Section 7(a) must be applied in the assessment and payment
of the proper docket fee.
Resultantly, there is no grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the court a quo. By grave abuse of discretion is meant capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, and mere abuse of discretion is not
enough – it must be grave. The abuse must be grave and patent, and it must be shown that the
discretion was exercised arbitrarily and despotically.1avvphi1
Such a situation does not exist in this particular case. The evidence is insufficient to prove that the
court a quo acted despotically in rendering the assailed orders. It acted properly and in accordance
with law. Hence, error cannot be attributed to it.25
Hence, the fallo of the Decision of the appellate court reads:
WHEREFORE, the petition for certiorari is DENIED. The assailed Orders of the court a quo are
AFFIRMED.26
Without seeking reconsideration of the foregoing Decision with the Court of Appeals, petitioner
filed its Petition for Review on Certiorari before this Court, with a lone assignment of error, to wit:
18. The herein petitioner most respectfully submits that the Court of Appeals committed a grave
and serious reversible error in affirming the assailed Orders of the Regional Trial Court which
are clearly contrary to the pronouncement of this Honorable Court in the case of Spouses De Leon
v. Court of Appeals, G.R. No. 104796, March 6, 1998, not to mention the fact that if the said
judgment is allowed to stand and not rectified, the same would result in grave injustice and
irreparable damage to herein petitioner in view of the prohibitive amount assessed as a
consequence of said Orders.27
In Manchester Development Corporation v. Court of Appeals,28 the Court explicitly pronounced
that "[t]he court acquires jurisdiction over any case only upon the payment of the prescribed docket
fee." Hence, the payment of docket fees is not only mandatory, but also jurisdictional.
In Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 29 the Court laid down guidelines for the
implementation of its previous pronouncement in Manchester under particular circumstances, to
wit:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that vests a trial court with jurisdiction over the
subject matter or nature of the action. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the fee
within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said fee within a reasonable time
but also in no case beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
pleading and payment of the prescribed filing fee but, subsequently, the judgment
awards a claim not specified in the pleading, or if specified the same has been left for
determination by the court, the additional filing fee therefor shall constitute a lien on the
judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy
to enforce said lien and assess and collect the additional fee.
In the Petition at bar, the RTC found, and the Court of Appeals affirmed, that petitioner did not pay
the correct amount of docket fees for Civil Case No. 2006-0030. According to both the trial and
appellate courts, petitioner should pay docket fees in accordance with Section 7(a), Rule 141 of
the Rules of Court, as amended. Consistent with the liberal tenor of Sun Insurance, the RTC,
instead of dismissing outright petitioner’s Complaint in Civil Case No. 2006-0030, granted
petitioner time to pay the additional docket fees. Despite the seeming munificence of the RTC,
petitioner refused to pay the additional docket fees assessed against it, believing that it had
already paid the correct amount before, pursuant to Section 7(b)(1), Rule 141 of the Rules of
Court, as amended.
Relevant to the present controversy are the following provisions under Rule 141 of the Rules of
Court, as amended by A.M. No. 04-2-04-SC30 and Supreme Court Amended Administrative
Circular No. 35-200431 :
SEC. 7. Clerks of Regional Trial Courts. –
(a) For filing an action or a permissive OR COMPULSORY counterclaim, CROSS-CLAIM, or
money claim against an estate not based on judgment, or for filing a third-party, fourth-party, etc.
complaint, or a complaint-in-intervention, if the total sum claimed, INCLUSIVE OF INTERESTS,
PENALTIES, SURCHARGES, DAMAGES OF WHATEVER KIND, AND ATTORNEY’S FEES,
LITIGATIO NEXPENSES AND COSTS and/or in cases involving property, the FAIR MARKET
value of the REAL property in litigation STATED IN THE CURRENT TAX DECLARATION OR
CURRENT ZONAL VALUATION OF THE BUREAU OF INTERNAL REVENUE, WHICHEVER IS
HIGHER, OR IF THERE IS NONE, THE STATED VALUE OF THE PROPERTY IN LITIGATION
OR THE VALUE OF THE PERSONAL PROPERTY IN LITIGATION OR THE VALUE OF THE
PERSONAL PROPERTY IN LITIGATION AS ALLEGED BY THE CLAIMANT, is:
[Table of fees omitted.]
If the action involves both a money claim and relief pertaining to property, then THE fees will be
charged on both the amounts claimed and value of property based on the formula prescribed in
this paragraph a.
(b) For filing:
1. Actions where the value of the subject matter cannot be estimated
2. Special civil actions, except judicial foreclosure of mortgage, EXPROPRIATION
PROCEEDINGS, PARTITION AND QUIETING OF TITLE which will
3. All other actions not involving property
[Table of fees omitted.]
22
The docket fees under Section 7(a), Rule 141, in cases involving real property depend on the fair
market value of the same: the higher the value of the real property, the higher the docket fees due.
In contrast, Section 7(b)(1), Rule 141 imposes a fixed or flat rate of docket fees on actions
incapable of pecuniary estimation.
In order to resolve the issue of whether petitioner paid the correct amount of docket fees, it is
necessary to determine the true nature of its Complaint. The dictum adhered to in this jurisdiction
is that the nature of an action is determined by the allegations in the body of the pleading or
Complaint itself, rather than by its title or heading.32However, the Court finds it necessary, in
ascertaining the true nature of Civil Case No. 2006-0030, to take into account significant facts and
circumstances beyond the Complaint of petitioner, facts and circumstances which petitioner failed
to state in its Complaint but were disclosed in the preliminary proceedings before the court a quo.
Petitioner persistently avers that its Complaint in Civil Case No. 2006-0030 is primarily for the
annulment of the Deeds of Absolute Sale. Based on the allegations and reliefs in the Complaint
alone, one would get the impression that the titles to the subject real properties still rest with
petitioner; and that the interest of respondents Tan and Obiedo in the same lies only in the Deeds
of Absolute Sale sought to be annulled.
What petitioner failed to mention in its Complaint was that respondents Tan and Obiedo already
had the Memorandum of Agreement, which clearly provided for the execution of the Deeds of
Absolute Sale, registered on the TCTs over the five parcels of land, then still in the name of
petitioner. After respondents Tan and Obiedo had the Deeds of Absolute Sale notarized on 3
January 2006 and presented the same to Register of Deeds for Naga City on 8 March 2006, they
were already issued TCTs over the real properties in question, in their own names. Respondents
Tan and Obiedo have also acquired possession of the said properties, enabling them, by
petitioner’s own admission, to demolish the improvements thereon.
It is, thus, suspect that petitioner kept mum about the afore-mentioned facts and circumstances
when they had already taken place before it filed its Complaint before the RTC on 16 March 2006.
Petitioner never expressed surprise when such facts and circumstances were established before
the RTC, nor moved to amend its Complaint accordingly.1avvphi1.zw+ Even though the
Memorandum of Agreement was supposed to have long been registered on its TCTs over the five
parcels of land, petitioner did not pray for the removal of the same as a cloud on its title. In the
same vein, although petitioner alleged that respondents Tan and Obiedo forcibly took physical
possession of the subject real properties, petitioner did not seek the restoration of such possession
to itself. And despite learning that respondents Tan and Obiedo already secured TCTs over the
subject properties in their names, petitioner did not ask for the cancellation of said titles. The only
logical and reasonable explanation is that petitioner is reluctant to bring to the attention of the
Court certain facts and circumstances, keeping its Complaint safely worded, so as to institute only
an action for annulment of Deeds of Absolute Sale. Petitioner deliberately avoided raising issues
on the title and possession of the real properties that may lead the Court to classify its case as a
real action.
No matter how fastidiously petitioner attempts to conceal them, the allegations and reliefs it sought
in its Complaint in Civil Case No. 2006-0030 appears to be ultimately a real action, involving as
they do the recovery by petitioner of its title to and possession of the five parcels of land from
respondents Tan and Obiedo.
A real action is one in which the plaintiff seeks the recovery of real property; or, as indicated in
what is now Section 1, Rule 4 of the Rules of Court, a real action is an action affecting title to or
recovery of possession of real property.33
Section 7, Rule 141 of the Rules of Court, prior to its amendment by A.M. No. 04-2-04-SC, had a
specific paragraph governing the assessment of the docket fees for real action, to wit:
In a real action, the assessed value of the property, or if there is none, the estimated value thereof
shall be alleged by the claimant and shall be the basis in computing the fees.
It was in accordance with the afore-quoted provision that the Court, in Gochan v. Gochan,34 held
that although the caption of the complaint filed by therein respondents Mercedes Gochan, et al.
with the RTC was denominated as one for "specific performance and damages," the relief sought
was the conveyance or transfer of real property, or ultimately, the execution of deeds of
conveyance in their favor of the real properties enumerated in the provisional memorandum of
agreement. Under these circumstances, the case before the RTC was actually a real action,
affecting as it did title to or possession of real property. Consequently, the basis for determining
the correct docket fees shall be the assessed value of the property, or the estimated value thereof
as alleged in the complaint. But since Mercedes Gochan failed to allege in their complaint the
value of the real properties, the Court found that the RTC did not acquire jurisdiction over the same
for non-payment of the correct docket fees.
Likewise, in Siapno v. Manalo,35 the Court disregarded the title/denomination of therein plaintiff
Manalo’s amended petition as one for Mandamus with Revocation of Title and Damages; and
adjudged the same to be a real action, the filing fees for which should have been computed based
on the assessed value of the subject property or, if there was none, the estimated value thereof.
The Court expounded in Siapno that:
In his amended petition, respondent Manalo prayed that NTA’s sale of the property in dispute to
Standford East Realty Corporation and the title issued to the latter on the basis thereof, be
declared null and void. In a very real sense, albeit the amended petition is styled as one for
"Mandamus with Revocation of Title and Damages," it is, at bottom, a suit to recover from
Standford the realty in question and to vest in respondent the ownership and possession thereof.
In short, the amended petition is in reality an action in res or a real action. Our pronouncement in
Fortune Motors (Phils.), Inc. vs. Court of Appeals is instructive. There, we said:
A prayer for annulment or rescission of contract does not operate to efface the true objectives and
nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)
An action for the annulment or rescission of a sale of real property is a real action. Its prime
objective is to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760, 1954)
An action to annul a real estate mortgage foreclosure sale is no different from an action to annul
a private sale of real property. (Muñoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the recovery of title or possession of the
property in question, his action for annulment of sale and his claim for damages are closely
intertwined with the issue of ownership of the building which, under the law, is considered
immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine
is that an action for the annulment or rescission of a sale of real property does not operate to
efface the fundamental and prime objective and nature of the case, which is to recover said real
property. It is a real action.
Unfortunately, and evidently to evade payment of the correct amount of filing fee, respondent
Manalo never alleged in the body of his amended petition, much less in the prayer portion thereof,
the assessed value of the subject res, or, if there is none, the estimated value thereof, to serve as
23
basis for the receiving clerk in computing and arriving at the proper amount of filing fee due
thereon, as required under Section 7 of this Court’s en banc resolution of 04 September 1990 (Re:
Proposed Amendments to Rule 141 on Legal Fees).
Even the amended petition, therefore, should have been expunged from the records.
In fine, we rule and so hold that the trial court never acquired jurisdiction over its Civil Case No.
Q-95-24791.36
It was in Serrano v. Delica,37 however, that the Court dealt with a complaint that bore the most
similarity to the one at bar. Therein respondent Delica averred that undue influence, coercion, and
intimidation were exerted upon him by therein petitioners Serrano, et al. to effect transfer of his
properties. Thus, Delica filed a complaint before the RTC against Serrano, et al., praying that the
special power of attorney, the affidavit, the new titles issued in the names of Serrano, et al., and
the contracts of sale of the disputed properties be cancelled; that Serrano, et al. be ordered to pay
Delica, jointly and severally, actual, moral and exemplary damages in the amount of ₱200,000.00,
as well as attorney’s fee of ₱200,000.00 and costs of litigation; that a TRO and a writ of preliminary
injunction be issued ordering Serrano, et al. to immediately restore him to his possession of the
parcels of land in question; and that after trial, the writ of injunction be made permanent. The Court
dismissed Delica’s complaint for the following reasons:
A careful examination of respondent’s complaint is that it is a real action. In Paderanga vs.
Buissan, we held that "in a real action, the plaintiff seeks the recovery of real property, or, as stated
in Section 2(a), Rule 4 of the Revised Rules of Court, a real action is one ‘affecting title to real
property or for the recovery of possession of, or for partition or condemnation of, or foreclosure of
a mortgage on a real property.’"
Obviously, respondent’s complaint is a real action involving not only the recovery of real properties,
but likewise the cancellation of the titles thereto.
Considering that respondent’s complaint is a real action, the Rule requires that "the assessed
value of the property, or if there is none, the estimated value thereof shall be alleged by the
claimant and shall be the basis in computing the fees."
We note, however, that neither the "assessed value" nor the "estimated value" of the questioned
parcels of land were alleged by respondent in both his original and amended complaint. What he
stated in his amended complaint is that the disputed realties have a "BIR zonal valuation" of
₱1,200.00 per square meter. However, the alleged "BIR zonal valuation" is not the kind of
valuation required by the Rule. It is the assessed value of the realty. Having utterly failed to comply
with the requirement of the Rule that he shall allege in his complaint the assessed value of his real
properties in controversy, the correct docket fee cannot be computed. As such, his complaint
should not have been accepted by the trial court. We thus rule that it has not acquired jurisdiction
over the present case for failure of herein respondent to pay the required docket fee. On this
ground alone, respondent’s complaint is vulnerable to dismissal. 38
Brushing aside the significance of Serrano, petitioner argues that said decision, rendered by the
Third Division of the Court, and not by the Court en banc, cannot modify or reverse the doctrine
laid down in Spouses De Leon v. Court of Appeals.39 Petitioner relies heavily on the declaration of
this Court in Spouses De Leon that an action for annulment or rescission of a contract of sale of
real property is incapable of pecuniary estimation.
The Court, however, does not perceive a contradiction between Serrano and the Spouses De
Leon. The Court calls attention to the following statement in Spouses De Leon: "A review of the
jurisprudence of this Court indicates that in determining whether an action is one the subject matter
of which is not capable of pecuniary estimation, this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought." Necessarily, the determination
must be done on a case-to-case basis, depending on the facts and circumstances of each. What
petitioner conveniently ignores is that in Spouses De Leon, the action therein that private
respondents instituted before the RTC was "solely for annulment or rescission" of the contract of
sale over a real property.40 There appeared to be no transfer of title or possession to the adverse
party. Their complaint simply prayed for:
1. Ordering the nullification or rescission of the Contract of Conditional Sale
(Supplementary Agreement) for having violated the rights of plaintiffs (private
respondents) guaranteed to them under Article 886 of the Civil Code and/or violation of
the terms and conditions of the said contract.
2. Declaring void ab initio the Deed of Absolute Sale for being absolutely simulated; and
3. Ordering defendants (petitioners) to pay plaintiffs (private respondents) attorney's
fees in the amount of ₱100,000.00.41
As this Court has previously discussed herein, the nature of Civil Case No. 2006-0030 instituted
by petitioner before the RTC is closer to that of Serrano, rather than of Spouses De Leon, hence,
calling for the application of the ruling of the Court in the former, rather than in the latter.
It is also important to note that, with the amendments introduced by A.M. No. 04-2-04-SC, which
became effective on 16 August 2004, the paragraph in Section 7, Rule 141 of the Rules of Court,
pertaining specifically to the basis for computation of docket fees for real actions was deleted.
Instead, Section 7(1) of Rule 141, as amended, provides that "in cases involving real property, the
FAIR MARKET value of the REAL property in litigation STATED IN THE CURRENT TAX
DECLARATION OR CURRENT ZONAL VALUATION OF THE BUREAU OF INTERNAL
REVENUE, WHICH IS HIGHER, OR IF THERE IS NONE, THE STATED VALUE OF THE
PROPERTY IN LITIGATION x x x" shall be the basis for the computation of the docket fees. Would
such an amendment have an impact on Gochan, Siapno, and Serrano? The Court rules in the
negative.
A real action indisputably involves real property. The docket fees for a real action would still be
determined in accordance with the value of the real property involved therein; the only difference
is in what constitutes the acceptable value. In computing the docket fees for cases involving real
properties, the courts, instead of relying on the assessed or estimated value, would now be using
the fair market value of the real properties (as stated in the Tax Declaration or the Zonal Valuation
of the Bureau of Internal Revenue, whichever is higher) or, in the absence thereof, the stated value
of the same.
In sum, the Court finds that the true nature of the action instituted by petitioner against respondents
is the recovery of title to and possession of real property. It is a real action necessarily involving
real property, the docket fees for which must be computed in accordance with Section 7(1), Rule
141 of the Rules of Court, as amended. The Court of Appeals, therefore, did not commit any error
in affirming the RTC Orders requiring petitioner to pay additional docket fees for its Complaint in
Civil Case No. 2006-0030.
The Court does not give much credence to the allegation of petitioner that if the judgment of the
Court of Appeals is allowed to stand and not rectified, it would result in grave injustice and
24
irreparable injury to petitioner in view of the prohibitive amount assessed against it. It is a sweeping
assertion which lacks evidentiary support. Undeniably, before the Court can conclude that the
amount of docket fees is indeed prohibitive for a party, it would have to look into the financial
capacity of said party. It baffles this Court that herein petitioner, having the capacity to enter into
multi-million transactions, now stalls at paying ₱720,392.60 additional docket fees so it could
champion before the courts its rights over the disputed real properties. Moreover, even though the
Court exempts individuals, as indigent or pauper litigants, from paying docket fees, it has never
extended such an exemption to a corporate entity.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. The
Decision, dated 22 November 2006, of the Court of Appeals in CA-G.R. SP No. 94800, which
affirmed the Orders dated 24 March 2006 and 29 March 2006 of the RTC, Branch 22, of Naga
City, in Civil Case No. RTC-2006-0030, ordering petitioner Ruby Shelter Builders and Realty
Development Corporation to pay additional docket/filing fees, computed based on Section 7(a),
Rule 141 of the Rules of Court, as amended, is hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

25
 6. St. Louis University v. Cobarrubias – Commencement of Actions Thus, on January 14, 2008, the CA dismissed the petition outright for Cobarrubias’ procedural
lapses.15Cobarrubias received the CA resolution, dismissing her petition, on January 31, 2008.16
The facts of the case, gathered from the records, are briefly summarized below.
On February 15, 2008, Cobarrubias filed her motion for reconsideration, arguing that the ground
cited is technical. She, nonetheless, attached to her motion copies of the material portions of the
Respondent Evangeline C. Cobarrubias is an associate professor of the petitioner’s College of
record and the postal money orders for ₱4,230.00. She maintained that the ends of justice and
Human Sciences. She is an active member of the Union of Faculty and Employees of Saint Louis
fair play are better served if the case is decided on its merits.17
University (UFESLU).

On July 30, 2008, the CA reinstated the petition. It found that Cobarrubias substantially complied
The 2001-20065 and 2006-20116 Collective Bargaining Agreements (CBAs) between SLU and
with the rules by paying the appeal fee in full and attaching the proper documents in her motion
UFESLU contain the following common provision on forced leave:
for reconsideration.18

Section 7.7. For teaching employees in college who fail the yearly evaluation, the following
SLU insisted that the VA decision had already attained finality for Cobarrubias’ failure to pay the
provisions shall apply:
docket fees on time.

(a) Teaching employees who are retained for three (3) cumulative years in five (5) years shall be
The CA Decision
on forced leave for one (1) regular semester during which period all benefits due them shall be
suspended.7
The CA brushed aside SLU’s insistence on the finality of the VA decision and annulled it, declaring
that the "three (3) cumulative years in five (5) years" phrase in Section 7.7(a) of the 2006-2011
SLU placed Cobarrubias on forced leave for the first semester of School Year (SY) 2007-2008
CBA means within the five-year effectivity of the CBA. Thus, the CA ordered SLU to pay all the
when she failed the evaluation for SY 2002-2003, SY 2005-2006, and SY 2006-2007, with the
benefits due Cobarrubias for the first semester of SY 2007-2008, when she was placed on forced
rating of 85, 77, and 72.9 points, respectively, below the required rating of 87 points.
leave.19

To reverse the imposed forced leave, Cobarrubias sought recourse from the CBA’s grievance
When the CA denied20 the motion for reconsideration that followed,21 SLU filed the present petition
machinery. Despite the conferences held, the parties still failed to settle their dispute, prompting
for review on certiorari.22
Cobarrubias to file a case for illegal forced leave or illegal suspension with the National Conciliation
and Mediation Board of the Department of Labor and Employment, Cordillera Administrative
Region, Baguio City. When circulation and mediation again failed, the parties submitted the issues The Petition
between them for voluntary arbitration before Voluntary Arbitrator (VA) Daniel T. Fariñas.
SLU argues that the CA should not have reinstated the appeal since Cobarrubias failed to pay the
Cobarrubias argued that the CA already resolved the forced leave issue in a prior case between docket fees within the prescribed period, and rendered the VA decision final and executory. Even
the parties, CA-G.R. SP No. 90596,8 ruling that the forced leave for teachers who fail their if Cobarrubias’ procedural lapse is disregarded, SLU submits that Section 7.7(a) of the 2006-2011
evaluation for three (3) times within a five-year period should be coterminous with the CBA in force CBA should apply irrespective of the five-year effectivity of each CBA.23
during the same five-year period.9
The Case for Cobarrubias
SLU, for its part, countered that the CA decision in CA-G.R. SP No. 90596 cannot be considered
in deciding the present case since it is presently on appeal with this Court (G.R. No. 176717)10 and,
Cobarrubias insists that the CA settled the appeal fee issue, in its July 30, 2008 resolution, when
thus, is not yet final. It argued that the forced leave provision applies irrespective of which CBA is
it found that she had substantially complied with the rules by subsequently paying the docket fees
applicable, provided the employee fails her evaluation three (3) times in five (5) years. 11
in full. She submits that the CA’s interpretation of Section 7.7(a) of the 2006-2011 CBA is more in
accord with law and jurisprudence.24
The Voluntary Arbitrator Decision
The Issues
On October 26, 2007, VA Daniel T. Fariñas dismissed the case. 12 He found that the CA decision
in CA-G.R. SP No. 90596 is not yet final because of the pending appeal with this Court. He noted
The core issues boil down to whether the CA erred in reinstating Cobarrubias’ petition despite her
that the CBA clearly authorized SLU to place its teaching employees on forced leave when they
failure to pay the appeal fee within the reglementary period, and in reversing the VA decision. To
fail in the evaluation for three (3) years within a five-year period, without a distinction on whether
state the obvious, the appeal fee is a threshold issue that renders all other issues unnecessary if
the three years fall within one or two CBA periods. Cobarrubias received the VA’s decision on
SLU’s position on this issue is correct.
November 20, 2007.13

The Court’s Ruling

On December 5, 2007, Cobarrubias filed with the CA a petition for review under Rule 43 of the
Rules of Court, but failed to pay the required filing fees and to attach to the petition copies of the
material portions of the record.14
26
We find the petition meritorious.
Payment of Appellate Court Docket Fees
Appeal is not a natural right but a mere statutory privilege, thus, appeal must be made strictly in
accordance with the provision set by law.25 Rule 43 of the Rules of Court provides that appeals
from the judgment of the VA shall be taken to the CA, by filing a petition for review within fifteen
(15) days from the receipt of the notice of judgment. 26Furthermore, upon the filing of the petition,
the petitioner shall pay to the CA clerk of court the docketing and other lawful fees; 27 non-
compliance with the procedural requirements shall be a sufficient ground for the petition’s
dismissal.28 Thus, payment in full of docket fees within the prescribed period is not only mandatory,
but also jurisdictional.29 It is an essential requirement, without which, the decision appealed from
would become final and executory as if no appeal has been filed. 30
to the fault or negligence of the party favored by the suspension of the rules; (7) a lack of any
showing that the review sought is merely frivolous and dilatory; (8) the other party will not be
unjustly prejudiced thereby; (9) fraud, accident, mistake or excusable negligence without the
appellant's fault; (10) peculiar, legal and equitable circumstances attendant to each case; (11) in
the name of substantial justice and fair play; (12) importance of the issues involved; and (13)
exercise of sound discretion by the judge, guided by all the attendant circumstances.52 Thus, there
should be an effort, on the part of the party invoking liberality, to advance a reasonable or
meritorious explanation for his/her failure to comply with the rules.1avvphi1
In Cobarrubias' case, no such explanation has been advanced. Other than insisting that the
ends of justice and fair play are better served if the case is decided on its merits, Cobarrubias
offered no excuse for her failure to pay the docket fees in full when she filed her petition for review.
To us, Cobarrubias’ omission is fatal to her cause.

We, thus, find that the CA erred in reinstating Cobarrubias’ petition for review despite the
As early as the 1932 case of Lazaro v. Endencia and Andres, 31 we stressed that the payment of
nonpayment of the requisite docket fees within the reglementary period. The VA decision had
the full amount of the docket fee is an indispensable step for the perfection of an appeal. In Lee v.
lapsed to finality when the docket fees were paid; hence, the CA had no jurisdiction to entertain
Republic,32 we decided that even though half of the appellate court docket fee was deposited, no
the appeal except to order its dismissal.
appeal was deemed perfected where the other half was tendered after the period within which
payment should have been made. In Aranas v. Endona,33 we reiterated that the appeal is not
perfected if only a part of the docket fee is deposited within the reglementary period and the WHEREFORE, the present petition is GRANTED. The assailed decision and resolution of the
remainder is tendered after the expiration of the period. Court of Appeals in CA-G.R. SP No. 101708 are hereby DECLARED VOID and are
consequently SET ASIDE. The decision of the voluntary arbitrator, that the voided Court of
Appeals decision and resolution nullified, stands. No pronouncement as to costs.
The rulings in these cases have been consistently reiterated in subsequent cases: Guevarra v.
Court of Appeals,34Pedrosa v. Spouses Hill,35 Gegare v. Court of Appeals,36 Lazaro v. Court of
Appeals,37 Sps. Manalili v. Sps. de Leon,38 La Salette College v. Pilotin,39 Saint Louis University SO ORDERED.
v. Spouses Cordero,40 M.A. Santander Construction, Inc. v. Villanueva,41 Far Corporation v.
Magdaluyo,42 Meatmasters Int’l. Corp. v. Lelis Integrated Dev’t. Corp., 43Tamayo v. Tamayo,
Jr.,44 Enriquez v. Enriquez,45 KLT Fruits, Inc. v. WSR Fruits, Inc.,46 Tan v. Link,47 Ilusorio v.
Ilusorio-Yap,48 and most recently in Tabigue v. International Copra Export Corporation
(INTERCO),49 and continues to be the controlling doctrine.

In the present case, Cobarrubias filed her petition for review on December 5, 2007, fifteen (15)
days from receipt of the VA decision on November 20, 2007, but paid her docket fees in full only
after seventy-two (72) days, when she filed her motion for reconsideration on February 15, 2008
and attached the postal money orders for ₱4,230.00. Undeniably, the docket fees were paid late,
and without payment of the full docket fees, Cobarrubias’ appeal was not perfected within the
reglementary period.

Exceptions to the Rule on Payment of Appellate Court Docket Fees not applicable

Procedural rules do not exist for the convenience of the litigants; the rules were established
primarily to provide order to and enhance the efficiency of our judicial system. 50 While procedural
rules are liberally construed, the provisions on reglementary periods are strictly applied,
indispensable as they are to the prevention of needless delays, and are necessary to the orderly
and speedy discharge of judicial business.51

Viewed in this light, procedural rules are not to be belittled or dismissed simply because their non-
observance may have prejudiced a party's substantive rights; like all rules, they are required to be
followed. However, there are recognized exceptions to their strict observance, such as: (1) most
persuasive and weighty reasons; (2) to relieve a litigant from an injustice not commensurate with
his failure to comply with the prescribed procedure; (3) good faith of the defaulting party by
immediately paying within a reasonable time from the time of the default; (4) the existence of
special or compelling circumstances; (5) the merits of the case; (6) a cause not entirely attributable
27
 7. Gipa v. Southern Luzon Institute – Commencement of Actions
Suffice it to say that "[ c ]oncomitant to the liberal interpretation of the rules of procedure should
be an effort on the part of the party invoking liberality to adequately explain his failure to abide by
the rules."2 Those who seek exemption from the application of the rule have the burden of proving
the existence of exceptionally meritorious reasons warranting such departure. 3 Assailed in this
Petition for Review on Certiorari is the December 20, 2006 Resolution4 of the Court of Appeals
(CA) in CA-G.R. CV No. 85215 which dismissed for non-perfection herein petitioners' appeal from
the January 5, 2005 Decision' of the Regional Trial Court (RTC), Branch 65, Sorsogon City in Civil
Case No. 547-37. Likewise questioned is the CA Resolution6 dated March 30, 2007 which denied
the Motion for Reconsideration thereto.
Factual Antecedents
On February 26, 1996, respondent Southern Luzon Institute (SLI), an educational institution in
Bulan, Sorsogon, filed a Complaint7 for Recovery of Ownership and Possession with Damages
against petitioners Alonzo Gipa, Imelda Marollano, Juanito Ludovice, Demar Bitangcor, Virgilio
Gojit, Felipe Montalban and four others namely, Arturo Rogacion, Virgilio Gracela, Rosemarie
Alvarez and Rosita Montalban (Rosita). During trial, defendant Rosita executed a Special Power
of Attorney8 in favor of her sister Daisy M. Placer (Placer) authorizing the latter to represent her in
the case and to sign any and all papers in relation thereto.
SLI alleged that it is the absolute owner of a 7,516-squaremeter parcel of land situated in Brgy.
Poblacion, Bulan, Sorsogon covered by Original Certificate of Title (OCT) No. P-28928. However,
petitioners and their co-defendants who had been informally occupying a portion of the said
property refused to vacate the same despite demand. Hence, SLI sought that they be ordered to
immediately vacate the premises, turn over the same to SLI, and pay compensatory damages,
attorney’s fees and cost of suit.
In their Answer with Counterclaim,9 petitioners and their co-defendants asserted that they did not
heed SLI’s demand to vacate as they believed that they have the right to stay on the said property.
They relied on their occupation thereof and that of their predecessors-in-interest which, according
to them, dates back to as early as 1950. Impugning SLI’s claims, petitioners and their co-
defendants averred that SLI had not even for a single moment taken possession of the subject
property and was merely able to procure a title over the same thru fraud, bad faith and
misrepresentation. By way of counterclaim, they prayed that they be declared the lawful
possessors of the property; that OCT No. P-28928 be declared null and void; and, that SLI be
ordered to pay them moral damages and litigation expenses.
Ruling of the Regional Trial Court
Finding SLI to have proven its ownership of the property by preponderance of evidence, the RTC
rendered a Decision10 in its favor on January 5, 2005. The said court gave weight to SLI’s
documentary evidence showing the grant of its Miscellaneous Sales Application (MSA) over the
subject property which became the basis for the issuance of title under its name, and the testimony
of the Supervising Draftsman of the National Housing Authority (NHA) who categorically stated
that the houses occupied by petitioners and their co-defendants were within the property of SLI
per NHA’s survey. It rejected, on the other hand, petitioners and their co-defendants’ claim of title
to the property. For one, the fact that SLI had an existing MSA over the property as far back as
1969 could not have been unknown to them. This is because several of the petitioners and their
codefendants filed Revocable Permit Applications over the same property which were denied on
March 4, 1964, precisely because the areas applied for were already included in SLI’s MSA. For
another, the documentary evidence submitted by them consisted mostly of tax declarations and
other documents which were self-serving and could not be considered as conclusive evidence of
ownership. Hence, the RTC ruled:
WHEREFORE, premises considered, judgment is hereby rendered –
a) Declaring plaintiff-SLI as absolute owner of that portion of Lot 4705 containing an
area of SEVEN THOUSAND FIVE HUNDRED SIXTEEN (7,516) SQUARE METERS
covered by "Katibayan ng Orihinal na Titulo Blg. P-28928".
b) Ordering herein defendants to vacate and relinquish the portions of lot 4705
belonging to the SLI that they are presently occupying illegally and to demolish the
residential houses existing thereon at their own expense.
c) To pay attorney’s fee in the amount of Php10,000.00 jointly.
d) And to pay the costs.
SO ORDERED.11
Petitioners and their co-defendants filed a Notice of Appeal12 which was granted by the RTC in its
Order13 of January 27, 2005.
Ruling of the Court of Appeals
The CA, however, dismissed the appeal in its Resolution14 of August 26, 2005 since it was not
shown that the appellate court docket fees and other lawful fees were paid.15 Petitioners and their
co-defendants promptly filed a Motion for Reconsideration16 to which they attached a
Certification17 from the RTC that they paid the appeal fee in the amount of₱3,000.00 under Official
Receipt No. 18091130 dated January 25, 2005. In view of this, the CA granted the said motion
and consequently reinstated the appeal through a Resolution18 dated November 2, 2005.
Subsequently, however, the CA further required petitioners and their codefendants, through a
Minute Resolution19dated March 1, 2006,to remit within ten days from notice the amount of ₱30.00
for legal research fund, which apparently was not included in the ₱3,000.00 appeal fee previously
paid by them. Copy of the said resolution was received on March 13,2006 by petitioners’ counsel,
Atty. Jose G. Gojar of the Public Attorney’s Office.20
Despite the lapse of nine months from their counsel’s receipt of the said resolution, petitioners and
their co-defendants, however, failed to comply with the CA’s directive. Hence, the said court
dismissed the appeal through its Resolution21 of December 20, 2006in this wise:
Jurisprudence is replete that the nonpayment of the docket and other lawful fees within the
reglementary period as provided under Section 4 of Rule 41 of the Revised Rules of [C]ourt is a
ground for the dismissal of an appeal, as provided for under Section 1(c)[,] Rule 50 of the same
Rule. We quote:
SECTION 1. Grounds for dismissal of appeal. – An appeal may be dismissed by the Court of
Appeals, on its own motion or on that of the appellee, on the following grounds:
28
xxx xxx xxx
c. Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule
41; x x x
xxxx
In the instant case, appellants were given sufficient time to complete the payment of the appeal
fees. Unfortunately, appellants still failed to comply with the said directive [despite the fact] that
the amount of ₱30.00 involved is very little. Hence, appellants failed to perfect their appeal for
failure to fully pay the appeal fees. They are deemed to have lost interest over the instant appeal.
xxxx
WHEREFORE, premises considered, the instant Appeal is hereby DISMISSED.
SO ORDERED.22
Petitioners and their co-defendants filed a Motion for Reconsideration23 invoking the principle of
liberality in the application of technical rules considering that they have paid the substantial amount
of ₱3,000.00 for docket and other legal fees and fell short only by the meager amount of ₱30.00.
Ascompliance, they attached to the said motion a postal money order in the sum of ₱30.00 payable
to the Clerk of Court of the CA.24
The CA, however, was not swayed, hence, the denial of the Motion for Reconsideration in its
Resolution25 of March 30, 2007.
Issue
Petitioners and Placer now file this Petition for Review on Certiorari raising the lone issue of:
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE APPEAL FILED
BY THE PETITIONERS FOR FAILURE TO REMIT THE MEAGERAMOUNT OF THIRTY PESOS
(₱30.00) AFTER HAVING ADVANCED A SUBSTANTIAL PORTION OF THE DOCKET FEES. 26
It must, however, be noted at the outset that the caption of the present Petition includes Placer as
one of the petitioners. In fact, the other petitioners even authorized her to sign the verification and
certification of non-forum shopping in their behalf.27 A review of the records, however, shows that
she was not one of the defendants before the RTC. Her only participation therein was that she
represented her sister Rosita as one of the defendants by virtue of a Special Power of Attorney
which the latter executed in her favor.28 Notably in the present Petition, Placer appears to have
been impleaded in her personal capacity and not as Rosita’s representative. This cannot be done.
It bears emphasizing that an appeal on certiorari, as in this case, is a continuation of the original
suit.29 Hence, the parties in the original suit must also be the parties in such an appeal. 30 Placer,
therefore, not being a party in the complaint before the RTC has no personality to continue the
same on appeal and cannot be considered as a petitioner. At the most, her only role in this Petition
was to sign the verification and certification of non-forum shopping for and in behalf of petitioners.
The Parties’ Arguments
Initially, petitioners invoke the liberal application of technical rules 31 and contend that the fact that
only the amount of ₱30.00 was not paid justifies relaxation of the same. Later in their
Reply,32 however, petitioners concede that the payment of docket fees is not a mere technicality.
Nevertheless, they point out that while full payment of docket fees is indispensable in the
perfection of an appeal, the same admits of exceptions. 33 Their case falls under one of the
exceptions, that is, in the name of substantial justice and fair play. According to petitioners, the
dismissal of their appeal for failure to pay ₱30.00 runs counter to substantial justice and fair play
as the same would deprive them of their right to justice and render ineffective the amount of
₱3,000.00, which despite being indigents, they undertook to pay. To support their case, petitioners
cited Andrea Camposagrado v. Pablo Camposagrado34 and Spouses Gutierrez v. Spouses
Valiente35 wherein the Court excused the insufficient payment of docket fees.1âwphi1 Moreover,
petitioners raise in the said Reply, albeit for the first time, the argument that while Republic Act
(RA) No. 940636 was still in existent at the time their appeal was filed before the CA, Section
637 thereof which exempts PAO clients like themselves from the payment of docket and other fees
should be given retroactive application.
For its part, SLI argues that since petitioners’ appeal was not perfected due to insufficient payment
of docket and other legal fees, the January 5, 2005 Decision of the RTC had already become final
and executory. Further, the CA correctly dismissed petitioners’ appeal because aside from the fact
that petitioners failed to comply with the CA’s directive to pay the lacking amount of ₱30.00 for a
period of more than nine months from their counsel’s receipt of notice, no plausible explanation
was tendered by them for such failure.
Our Ruling
The Petition fails.
Payment of the full amount of appellate
court docket and lawful fees is
mandatory and jurisdictional;
Relaxation of the rule on payment of
appeal fee is unwarranted in this case.
Section 4, Rule 41 of the Rules of Court provides:
Sec. 4. Appellate court docket and other lawful fees. – Within the period for taking an appeal, the
appellant shall pay to the clerk of court which rendered the judgment or final order appealed from,
the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees
shall be transmitted to the appellate court together with the original record or the record on appeal.
(Emphases supplied)
In Gonzales v. Pe,38 the Court’s explanation anent the requirement of full payment of docket and
other lawful fees under the above-quoted provision was iterated, viz:
In Far Corporation v. Magdaluyo, as with other subsequent cases of the same ruling, the Court
explained that the procedural requirement under Section 4 of Rule 41 is not merely directory, as
the payment of the docket and other legal fees within the prescribed period is both mandatory and
jurisdictional. It bears stressing that an appeal is not a right, but a mere statutory privilege. An
ordinary appeal from a decision or final order of the RTC to the CA must be made within 15 days
from notice. And within this period, the full amount of the appellate court docket and other lawful
fees must be paid to the clerk of the court which rendered the judgment or final order appealed
from. The requirement of paying the full amount of the appellate docket fees within the prescribed
period is not a mere technicality of law or procedure. The payment of docket fees within the
29
prescribed period is mandatory for the perfection of an appeal. Without such payment, the appeal
is not perfected. The appellate court does not acquire jurisdiction over the subject matter of the
action and the Decision sought to be appealed from becomes final and executory. Further, under
Section 1 (c), Rule 50, an appeal may be dismissed by the CA, on its own motion or on that of the
appellee, on the ground of the non-payment of the docket and other lawful fees within the
reglementary period as provided under Section 4 of Rule 41. The payment of the full amount of
the docket fee is an indispensable step for the perfection of an appeal. In both original and
appellate cases, the court acquires jurisdiction over the case only upon the payment of the
prescribed docket fees.39
Here, petitioners concede that payment of the full amount of docket fees within the prescribed
period is not a mere technicality of law or procedure but a jurisdictional requirement. Nevertheless,
they want this Court to relax the application of the rule on the payment of the appeal fee in the
name of substantial justice and equity.
The Court is not persuaded.
The liberality which petitioners pray for has already been granted to them by the CA at the outset.
It may be recalled that while petitioners paid a substantial part of the docket fees, they still failed
to pay the full amount thereof since their payment was short of ₱30.00.Based on the premise that
the questioned Decision of the RTC has already become final and executory due to non-perfection,
the CA could have dismissed the appeal outright. But owing to the fact that only the meager
amount of ₱30.00 was lacking and considering that the CA may opt not to proceed with the case
until the docket fees are paid,40 it still required petitioners, even if it was already beyond the
reglementary period, to complete their payment of the appeal fee within 10 days from notice.
Clearly, the CA acted conformably with the pronouncement made in Camposagrado, a case cited
by petitioners, that "[a] party’s failure to pay the appellate docket fee within the reglementary period
confers only a discretionary and not a mandatory power to dismiss the proposed appeal. Such
discretionary power should be used in the exercise of the court’s sound judgment in accordance
with the tenets of justice and fair play with great deal of circumspection, considering all attendant
circumstances and must be exercised wisely and prudently, never capriciously, with a view to
substantial justice."41
The CA’s leniency over petitioners’ cause did not end there. Although they were given only 10
days to remit the ₱30.00 deficiency, the said court allowed an even longer period of nine months
to lapse, apparently in the hope that petitioners’ compliance would be on its way. But as no
payment was remitted, it was constrained to finally dismiss the appeal for non-perfection.
Surprisingly, petitioners were again heard of when they filed a Motion for Reconsideration to which
they attached a postal money order of ₱30.00. Nevertheless, they did not offer any plausible
explanation either as to why they, at the start, failed to pay the correct docket fees or why they
failed to comply with the CA’s directive for them to remit the ₱30.00-deficiency. Instead, they
focused on begging the CA for leniency, arguing that the meager amount of the deficiency involved
justifies relaxation of the rules. What is worse is that even if the CA already took note of the lack
of such explanation in its Resolution denying petitioners’ motion for reconsideration, petitioners,
up to now, have not attempted to tender one in this Petition and instead continue to capitalize on
substantial justice, fair play and equity to secure a reversal of the dismissal of their appeal. The
Court cannot, therefore, help but conclude that there is really no plausible reason behind the said
omission.
Suffice it to say that "[c]oncomitant to the liberal interpretation of the rules of procedure should be
an effort on the part of the party invoking liberality to adequately explain his failure to abide by the
rules."42 Those who seek exemption from the application of the rule have the burden of proving
the existence of exceptionally meritorious reason warranting such departure. 43 Petitioners’ failure
to advance any explanation as to why they failed to pay the correct docket fees or to complete
payment of the same within the period allowed by the CA is thus fatal to their cause. Hence, a
departure from the rule on the payment of the appeal fee is unwarranted. Neither do the cases
cited by petitioners help because they are not in point. Unlike in this case, the CA in
Camposagrado no longer required the petitioners therein to complete the payment of the appeal
fee by remitting the ₱5.00 deficiency but just dismissed the appeal outright. Moreover, a justifiable
reason for the insufficient payment was tendered by petitioners in the said case, i.e., that they
relied on the assessment made by the collection officer of the court and honestly believed that the
amount collected from them was that which is mandated by the Rules.1âwphi1
The same thing goes true with Gutierrez. In fact, the pronouncement made in Sun Insurance
Office, Ltd. v. Asuncion,44 as cited in Gutierrez, even militates against petitioners. It was reiterated
therein that the rule that "a court acquires jurisdiction over any case only upon payment of the
prescribed docket fees does not apply where the party does not deliberately intend to defraud the
court in payment of docket fees, and manifests its willingness to abide by the rules by paying
additional docket fees when required by the court." 45 As may be recalled, petitioners in this case
did not immediately remit the deficient amount of ₱30.00 when required by the CA and only did so
after the lapse of more than nine months when their appeal was already dismissed.
The Court need not belabor the issue
of the retroactive application of Section 6
of RA 9406.
"The purpose of a reply is to deny or allege facts in denial of new matters alleged by way of defense
in the answer,"46 or in this case, in the comment to the petition. "It is not the office or function of a
reply to set up or introduce a new [issue] or to amend or amplify the [Petition]." 47 The issue of
whether Section 6 of RA 9406 should be given retroactive application in order to exempt petitioners
from payment of docket fees was therefore improperly introduced in petitioners’ Reply. Moreover,
"[t]he rule in pleadings and practice is that no new issue in a case can be raised in a pleading
which by due diligence could have been raised in previous pleadings." 48 Here, petitioners at the
outset could have very well raised the said issue in the Petition since at the time of its filing on
June 7, 2007, RA 9406 was already in effect.49 However, they failed to do so. Besides, for this
Court to take cognizance of the same is to offend the basic rules of fair play, justice and due
process since SLI had no chance to propound its argument in connection thereto. This is because
even if it wanted to, SLI could not anymore do so in its Memorandum as no new issues or
arguments may be raised in the said pleading, it being only the summation of the parties’ previous
pleadings.50 For these reasons, the Court sees no need to belabor the issue of the retroactive
application of Section 6 of RA 9406.
All told, the Court finds the CA’s dismissal of the appeal interposed by petitioners in order.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed Resolutions dated
December 20, 2006 and March 30, 2007 of the Court of Appeals in CA-G.R. CV No. 85215 are
AFFIRMED.
SO ORDERED.
30
 8. Reyes v. People – Commencement of Actions That on or about June 6, 1961, in the City of Cavite, Republic of the Philippines and
within the jurisdiction of this Honorable Court, the above named accused, did then and
there, willfully, unlawfully and feloniously, orally threaten to kill, one Agustin Hallare.
This case is before us on appeal by certiorari, from the decision of the Court of Appeals affirming
that a the municipal court of Cavite City, convicting Rosauro Reyes of the crimes of grave threats Contrary to law.
and grave oral defamation, and sentencing him, in the first case (Criminal Case No. 2594), to four
(4) months and ten (10) days of arresto mayor and to pay a fine of P300, with subsidiary
imprisonment in case of insolvency; and in the second case (Criminal Case No. 2595), to an Cavite City, July 24, 1961.
indeterminate penalty of from four (4) months of arresto mayor to one (1) year and eight (8) months
of prison correccional and to pay Agustin Hallare the sum of P800 as moral damages, with costs DEOGRACIAS S. SOLIS
in both cases. City Fiscal

The petitioner herein, Rosauro Reyes, was a former civilian employee of the Navy Exchange, BY: (SGD.) BUEN N. GUTIERREZ
Sangley Point, Cavite City, whose services were terminated on May 6, 1961. In the afternoon of Special Counsel
June 6, 1961, he led a group of about 20 to 30 persons in a demonstration staged in front of the
main gate of the United States Naval Station at Sangley Point. They carried placards bearing
statements such as, "Agustin, mamatay ka;" "To, alla boss con Nolan;" "Frank do not be a common The undersigned complainant, after being duly sworn to an oath in accordance with
funk;" "Agustin, mamamatay ka rin"; "Agustin, Nolan for you;" "Agustin alla bos con Nolan;" law, accuses Rosauro Reyes of the crime of Grave Oral Defamation, as defined and
"Agustin, dillega, el dia di quida rin bo chiquiting;" and others. The base commander, Capt. penalized by Article 358 of the Revised Penal Code, committed as follows:
McAllister, called up Col. Patricia Monzon, who as Philippine Military Liaison Officer at Sangley
Point was in charge of preserving harmonious relations between personnel of the naval station That on or about June 6, 1961, in the City of Cavite, Republic of the Philippines and
and the civilian population of Cavite City. Capt. McAllister requested Col. Monzon to join him at within the jurisdiction of this Honorable Court, the above named accused, without any
the main gate of the base to meet the demonstrators. Col. Monzon went to the place and talked justifiable motive but with the intention to cause dishonor, discredit and contempt to the
to Rosauro Reyes and one Luis Buenaventura upon learning that the demonstration was not undersigned complainant, in the presence of and within hearing of several persons, did
directed against the naval station but against Agustin Hallare and a certain Frank Nolan for their then and there, willfully, unlawfully and feloniously utter to the undersigned complainant
having allegedly caused the dismissal of Rosauro Reyes from the Navy Exchange, Col. Monzon the following insulting and serious defamatory remarks, to wit: "AGUSIN, PUTANG INA
suggested to them to demonstrate in front of Hallare's residence, but they told him that they would MO". which if translated into English are as follows: "Agustin, Your mother is a whore."
like the people in the station to know how they felt about Hallare and Nolan. They assured him,
however, that they did not intend to use violence, as "they just wanted to blow off steam."
Contrary to law.
At that time Agustin Hallare was in his office inside the naval station. When he learned about the
demonstration he became apprehensive about his safety, so he sought Col. Monzon's protection. Cavite City, July 25, 1961.
The colonel thereupon escorted Hallare, his brother, and another person in going out of the station,
using his (Monzon's) car for the purpose. Once outside, Col. Monzon purpose slowed down to (SGD.) AGUSTIN HALLARE
accommodate the request of Reyes. He told Hallare to take a good look at the demonstrators and Complainant
at the placards they were carrying. When the demonstrators saw Hallare they shouted, "Mabuhay
si Agustin." Then they boarded their jeeps and followed the car. One jeep overtook passed the car
while the other to led behind. After Hallare and his companions had alighted in front of his Subscribed and sworn to before me this. 25th day of July, 1961, in the City of Cavite,
residence at 967 Burgos St., Cavite City, Col. Monzon sped away. Philippines.

The three jeeps carrying the demonstrators parked in front of Hallare's residence after having
gone by it twice Rosauro Reyes got off his jeep and posted himself at the gate, and with his right
hand inside his pocket and his left holding the gate-door, he shouted repeatedly, "Agustin, putang
ina mo. Agustin, mawawala ka. Agustin lumabas ka, papatayin kita." Thereafter, he boarded his
jeep and the motorcade left the premises. Meanwhile, Hallare, frightened by the demeanor of
Reyes and the other demonstrators, stayed inside the house.lâwphi1.ñet
On the basis of the foregoing events Rosauro Reyes was charged on July 24 and 25, 1961 with
grave threats and grave oral defamation, respectively (Criminal Cases Nos. 2594 and 2595,
Municipal Court of Cavite City), as follows;
The undersigned City Fiscal of the City of Cavite accuses Rosauro Reyes of the crime
of Grave Threats, as defined by Article 282 of the Revised Penal Code and penalized
by paragraph 2 of the same Article, committed as follows:
(SGD.) BUEN N. GUTIERREZ
Special Counsel
Upon arraignment, the accused pleaded not guilty to both charges and the cases were set for
joint trial. On the day of the hearing the prosecution moved to amend the information in Criminal
Case No. 2594 for grave threats by deleting therefrom the word "orally". The defense counsel
objected to the motion on the ground that the accused had already been arraigned on the original
information and that the amendment "would affect materially the interest of the accused."
Nevertheless, the amendment was allowed and the joint trial proceeded.
From the judgment of conviction the accused appeal to the Court of Appeals, which returned a
verdict of affirmance. A motion for reconsideration having been denied, the accused brought this
appeal by certiorari.
31
 Petitioner avers that the Court of Appeals erred: (1) in affirming the proceedings in the lower hold that the appellate court was correct in upholding petitioner's conviction for the offense of
court allowing the substantial amendment of the information for grave threats after petitioner had grave threats.
been arraigned on the original information; (2) in proceeding with the trial of the case of grave
threats without first requiring petitioner to enter his plea on the amended information; (3) in
The charge of oral defamation stemmed from the utterance of the words, "Agustin, putang ina
convicting petitioner of both offenses when he could legally be convicted of only one offense,
mo". This is a common enough expression in the dialect that is often employed, not really to
thereby putting him in jeopardy of being penalized twice for the same offense; (4) in convicting
slander but rather to express anger or displeasure. It is seldom, if ever, taken in its literal sense
petitioner of grave threats when the evidence adduced and considered by the court tend to
by the hearer, that is, as a reflection on the virtues of a mother. In the instant case, it should be
establish the offense of light threats only; and (5) in convicting petitioner of grave oral defamation
viewed as part of the threats voiced by appellant against Agustin Hallare, evidently to make the
when the evidence tend to establish that of simple slander only.
same more emphatic. In the case of Yebra, G.R. No. L-14348, Sept. 30, 1960, this Court said:

On the first error assigned, the rule is that after the accused has pleaded the information may be
amended as to all matters of form by leave and at the discretion of the court when the same can
be done without prejudice to the rights of the defendant (Section 13, Rule 110, New Rules of
Court). Amendments that touch upon matters of substance cannot be permitted after the plea is
entered.
After a careful consideration of the original information, we find that all the elements of the crime
of grave threats as defined in Article 282 1 of the Revised Penal Code and penalized by its
paragraph 2 were alleged therein namely: (1) that the offender threatened another person with the
infliction upon his person of a wrong; (2) that such wrong amounted to a crime; and (3) that the
threat was not subject to a condition. Hence, petitioner could have been convicted thereunder. It
is to be noted that under the aforementioned provision the particular manner in which the threat is
made not a qualifying ingredient of the offense, such that the deletion of the word "orally" did not
affect the nature and essence of the crime as charged originally. Neither did it change the basic
theory of the prosecution that the accused threatened to kill Rosauro Reyes so as to require the
petitioner to undergo any material change or modification in his defense. Contrary to his claim,
made with the concurrence of the Solicitor General, petitioner was not exposed after the
amendment to the danger of conviction under paragraph 1 of Article 282, which provides for a
different penalty, since there was no allegation in the amended information that the threat was
made subject to a condition. In our view the deletion of the word "orally" was effected in order to
make the information conformable to the evidence to be presented during the trial. It was merely
a formal amendment which in no way prejudiced petitioner's rights.
The letter containing the allegedly libelous remarks is more threatening than libelous
and the intent to threaten is the principal aim and object to the letter. The libelous
remarks contained in the letter, if so they be considered, are merely preparatory remarks
culminating in the final threat. In other words, the libelous remarks express the beat of
passion which engulfs the writer of the letter, which heat of passion in the latter part of
the letter culminates into a threat. This is the more important and serious offense
committed by the accused. Under the circumstances the Court believes, after the study
of the whole letter, that the offense committed therein is clearly and principally that of
threats and that the statements therein derogatory to the person named do not
constitute an independent crime of libel, for which the writer maybe prosecuted
separately from the threats and which should be considered as part of the more
important offense of threats.
The foregoing ruling applies with equal force to the facts of the present case.
WHEREFORE, the decision appealed from is hereby reversed and petitioner is acquitted, with
costs de oficio, insofar as Criminal Case No. 2595 of the Court a quo (for oral defamation) is
concerned; and affirmed with respect to Criminal Case No. 2594, for grave threats, with costs
against petitioner.

Petitioner next contends that even assuming that the amendment was properly allowed, the trial
court committed a reversible error in proceeding with the trial on the merits without first requiring
him to enter his plea to the amended information. Considering, however, that the amendment was
not substantial, no second plea was necessary at all.

The third and fourth issues are related and will be discussed together. Petitioner avers that the
appellate court erred in affirming the decision of the trial court erred in affirming him of grave
threats and of grave oral defamation when he could legally be convicted of only one offense, and
in convicting him of grave threats at all when the evidence adduced and considered by the court
indicates the commission of light threats only.

The demonstration led by petitioner Agustin Hallare in front of the main gate of the naval station;
the fact that placards with threatening statements were carried by the demonstrators; their
persistence in trailing Hallare in a motorcade up to his residence; and the demonstration
conducted in front thereof, culminating in repeated threats flung by petitioner in a loud voice, give
rise to only one conclusion: that the threats were made "with the deliberate purpose of creating in
the mind of the person threatened the belief that the threat would be carried into effect." 2Indeed,
Hallare became so apprehensive of his safety that he sought the protection of Col. Monzon, who
had to escort him home, wherein he stayed while the demonstration was going on. It cannot be
denied that the threats were made deliberately and not merely in a temporary fit of anger,
motivated as they were by the dismissal of petitioner one month before the incident. We, therefore,

32
 9. Sy-Vargas v. Estate of Ogsos – Commencement of Actions
Assailed in this petition for review on certiorari[1] are the Decision[2] dated February 28, 2014 and
the Resolution[3]dated October 1, 2015 of the Court of Appeals (CA) in CA G.R. CV No. 03710,
which affirmed with modification the Decision[4] dated July 2, 2007 of the Regional Trial Court of
Dumaguete City, Branch 36 (RTC) in Civil Case No. 12708, thereby: (a) ordering petitioner
Elizabeth Sy-Vargas (petitioner) and her sister, Kathryn T. Sy (Kathryn), to pay respondents the
Estate of Rolando Ogsos, Sr. (Ogsos, Sr.) and Rolando Ogsos, Jr., (Ogsos, Jr.; collectively,
respondents) the amount of P10,391,981.76, representing the value of the sugar and molasses
that could have been produced from 1999 to 2004, if only respondents were not deprived by
petitioner and Kathryn of possession and enjoyment of the leased agricultural farm; and (b)
deleting the awards for moral and exemplary damages, as well as the attorney's fees and costs of
suit against respondents.
The Facts
On February 10, 1994, Ogsos, Sr. and the Heirs of Fermina Pepico (Fermina), represented by
their Attorney-in-Fact, Catalino V. Noel, entered into a Contract of Lease[5] (lease contract)
covering five (5) parcels of agricultural land owned by the latter, with an aggregate area of 23
hectares, more or less, situated in Maaslum Manjuyod, Negros Oriental (leased premises). Based
on the contract, Ogsos, Sr. agreed to pay the Heirs of Fermina 230 piculs or 290.95 liquid-kilogram
(lkg.) of centrifugal sugar every crop year, starting from crop year 1994-1995 to crop year 2000-
2001, as lease rental.[6]
On June 5, 1996, the term of the lease contract was extended for three (3) years, or until the end
of crop year 2004, due to Ogsos, Sr.'s introduction of improvements on the leased
premises.[7] Thereafter, or on December 30, 1996, the said contract was amended, modifying the
lease rental from 230 piculs or 290.95 lkg. of centrifugal sugar every crop year to P150,000.00
cash, beginning the crop year 1996-1997.[8]
Petitioner and Kathryn, who are among the heirs of Fermina, claimed that the lease rentals from
crop year 1994-1995 to crop year 1998-1999 were not paid. Thus, on April 27, 2000, [9] they filed
a Complaint[10] for Specific Performance and Damages against respondents, before the RTC,
docketed as Civil Case No. 12708, to recover the unpaid lease rentals. Pertinently, they did not
include in their claim the lease rental for crop year 1999-2000 because respondents had already
abandoned the leased premises since the said crop year.[11]
Summons was served in May 2000, but respondent Ogsos, Jr. only filed a motion to admit
answer[12] and answer[13]to the complaint after more than two (2) years, or on December 17,
2002.[14] Thus, petitioner and Kathryn filed on January 28, 2003, an opposition thereto, and moved
to declare respondents in default, which the RTC granted in an Order dated March 7, 2003. [15]
Their motion for reconsideration having been denied by the RTC, respondents, then, elevated the
matter via a petition for certiorari to the CA, docketed as CA-G.R. SP No. 79463, wherein the CA
granted respondents petition and remanded the case to the RTC. The CA ordered the RTC to
admit respondents' answer so as to give them the opportunity to be heard and to present their
side on the merits of the case.[16]
In their answer,[17] respondents alleged that they had faithfully complied with their obligations as
embodied in the lease contract and its subsequent amendments. [18] They denied abandoning the
leased premises and claimed that sometime in December 1998, petitioner and Kathryn unlawfully
took possession of the leased premises and appropriated for themselves the sugarcane ready for
harvest under the pretext that they would apply the proceeds thereof to the unpaid rent.[19] They
likewise alleged that in the same year, Ogsos, Sr. and his wife fell ill, which incidents forced
respondents to obtain loans from several businessmen, namely: Emiliano "Nonette" Bacang,
Zaldy Roleda, and Pastor Domocol.[20] The arrangement regarding the foregoing loans was that
the said creditors would be allowed to harvest the sugarcane from the leased premises and apply
the proceeds thereof to the loans.[21]However, when the creditors were about to harvest the
sugarcane, they were prevented by petitioner and Kathryn; resulting in respondents' default in the
payment of their debts.[22] On March 22, 2000, Ogsos, Sr. died.[23]
Respondents also averred that since crop years 1994 to 1997-1998, the average production of
sugarcane is 1,308.68 lkg. of sugar and 30.409 tons of molasses per year, as computed on the
basis of the Planter's Production Reports. Thus, when petitioner and Kathryn took possession of
the leased premises, respondents lost their profits equivalent to the aforesaid production starting
from crop year 1999-2000 until the termination of the lease contract on crop year 2003-
2004.[24] Accordingly, respondents filed a counterclaim for these lost profits plus damages. [25]
On June 6, 2005, respondents moved for the dismissal of the complaint in view of the absence of
the required Certificate of Non-Forum Shopping. In a Resolution dated November 9, 2005, the
RTC dismissed the case without prejudice.[26]
On December 15, 2005, respondents moved for the hearing of their counterclaim, to which the
RTC required petitioner and Kathryn to submit a comment, but none was filed. Hence, in an Order
dated February 9, 2006, the RTC set the case for reception of evidence on respondents'
counterclaim.[27]
On February 28, 2006, respondents filed an Ex-Parte Motion to Set Case for Pre-Trial, which was
granted by the RTC on March 1, 2006, setting the pre-trial on March 30, 2006. Petitioner, Kathryn,
and their counsel failed to appear at the pre-trial and to file their pre-trial brief. Thus, respondents
filed a manifestation with motion to present evidence ex-parte on June 7, 2006, praying that
petitioner and Kathryn be declared in default, and that respondents be allowed to present evidence
on their counterclaim ex-parte, which the RTC granted in an Order dated June 28,2006.[28]
Thereafter, or on August 16, 2006, petitioner and Kathryn moved to quash the June 28, 2006
Order, which was, however, denied on September 1, 2006 on the ground that the period to ask
for reconsideration or for the lifting of the order had already lapsed.[29]
On October 17, 2006, petitioner and Kathryn filed a motion to dismiss respondents' counterclaim
arguing that the same were permissive and that respondents had not paid the appropriate docket
fees.[30] However, the RTC, in its November 16, 2006 Order,[31] denied the said motion, declaring
respondents' counterclaim as compulsory; thus, holding that the payment of the required docket
fees was no longer necessary.[32]
The RTC Ruling
In a Decision[33] dated July 2, 2007, the RTC granted respondents' counterclaim, and
consequently, ordered petitioner and Kathryn to pay respondents the following amounts: (a)
P10,391,981.76 worth of sugar and molasses produced representing the value of 1,308.68 lkg. of
sugar and 30.409 tons of molasses for each crop year that defendant and Ogsos, Sr. were
deprived of possession and enjoyment of the leased premises; (b) P500,000.00 as moral
damages; (c) P100,000.00 as exemplary damages; (d) P100,000.00 as attorney's fees and
P1,000.00 for each personal appearance of respondents' counsel before the RTC; and (e)
P50,000.00 as costs of suit.[34] In so ruling, it found that Ogsos, Sr. faithfully paid the lease rentals
during the crop years 1994 to 1997[35] but eventually stopped their payments when petitioner and
Kathryn took possession and harvested the sugarcane in the leased premises sometime in
December 1998, despite respondents' objection.[36] Accordingly, petitioner and Kathryn reneged
on their obligation to maintain respondents' peaceful and adequate enjoyment of the leased
premises when the former forcibly and unlawfully deprived the latter of possession thereof in
December 1998, despite payment of the lease rentals. Due to this, petitioner and Kathryn were
held liable for breach of the lease contract.[37]
33
Dissatisfied, petitioner and Kathryn appealed to the CA.[38] to resolve the substantive issues of this case.

The CA Ruling II.

In a Decision[39] dated February 28, 2014 (CA Decision), the CA affirmed the ruling of the RTC but
deleted the awards for moral and exemplary damages, as well as the attorney's fees and costs of
suit due to the absence of proof that petitioner and Kathryn acted fraudulently or in bad faith. [40]
The CA ruled that the RTC was correct in ruling that respondents' counterclaim is not permissive
but compulsory; hence, payment of docket fees was not necessary.[41] Further, the CA ruled that
even though the counterclaim was compulsory, the same would not be automatically dismissed
upon the dismissal of the action if the dismissal was caused by the fault of the plaintiff, as in this
case.[42]
The counsel of petitioner and Kathryn received the CA Decision on March 14, 2014. [43] On March
31, 2014, petitioner and Kathryn filed their motion for reconsideration, [44] which was denied in the
Resolution[45] dated October 1, 2015 for being filed out of time; hence, the instant petition solely
filed by petitioner.[46]
The Issues Before the Court
The essential issues for resolution in this case are whether or not the CA correctly ruled that: (a)
petitioner's motion for reconsideration was filed out of time; (b) respondents' counterclaim for
damages is compulsory and not permissive in nature, and thus, no payment of docket fees is
required; and (c) respondents are entitled to such counterclaim.
The Court's Ruling
I.
Records bear out that in the assailed October 1, 2015 Resolution, the CA denied petitioner's
motion for reconsideration for being purportedly filed out of time. The CA explained that since the
registry return receipt showed that petitioner and Kathryn's counsel received the assailed March
14, 2014 Decision, it only had until March 29, 2014 to file a motion for reconsideration. However,
they only filed such motion on March 31, 2014, thus, rendering the assailed CA Decision final and
executory.
Notably, however, the CA failed to take into consideration that March 29, 2014 fell on a Saturday.
In these situations, Section 1, Rule 22 of the Rules of Court provides that:
Section. 1. How to compute time. - In computing any period of time prescribed or allowed by these
Rules, or by order of the court, or by any applicable statute, the day of the act or event from which
the designated period of time begins to run is to be excluded and the date of performance included.
If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in
the place where the court sits, the time shall not run until the next working day.
Since March 29, 2014 fell on a Saturday, petitioner and Kathryn were completely justified in filing
their motion for reconsideration on the next working day: Monday, March 31, 2014. Accordingly,
the CA should not have considered it filed out of time, and instead, resolved such motion on the
merits. In such an instance, court procedure dictates that the instant case be remanded to the CA
for resolution on the merits. However, when there is already enough basis on which a proper
evaluation of the merits may be had - as in this case - the Court may dispense with the time-
consuming procedure of remand in order to prevent further delays in the disposition of the case
and to better serve the ends of justice.[47] In view of the foregoing as well as the fact that petitioner
prayed for the resolution of the substantive issues on the merits [48] - the Court finds it appropriate
Essentially, the nature of a counterclaim is determinative of whether or not the counterclaimant is
required to pay docket fees. The rule in permissive counterclaims is that for the trial court to acquire
jurisdiction, the counterclaimant is bound to pay the prescribed docket fees.[49] On the other hand,
the prevailing rule with respect to compulsory counterclaims is that no filing fees are required for
the trial court to acquire jurisdiction over the subject matter.[50]
In general, a counterclaim is any claim which a defending party may have against an opposing
party. A compulsory counterclaim is one which, being cognizable by the regular courts of justice,
arises out of or is connected with the transaction or occurrence constituting the subject matter of
the opposing party's claim and does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction. A compulsory counterclaim is barred if not set up in
the same action.[51]
On the other hand, a counterclaim is permissive if it does not arise out of or is not necessarily
connected with the subject matter of the opposing party's claim. It is essentially an independent
claim that may be filed separately in another case.[52]
In Spouses Mendiola v. CA,[53] the Court had devised tests m determining whether or not a
counterclaim is compulsory or permissive:
The four tests to determine whether a counterclaim is compulsory or not are the following, to
wit: (a) Are the issues of fact or law raised by the claim and the counterclaim largely the
same? (b) Would res judicata bar a subsequent suit on defendant's claims, absent the
compulsory counterclaim rule? (c) Will substantially the same evidence support or refute
plaintiff's claim as well as the defendant's counterclaim? and (d) Is there any logical relation
between the claim and the counterclaim, such that the conduct of separate trials of the
respective claims of the parties would entail a substantial duplication of effort and time by
the parties and the court? Of the four, the one compelling test of compulsoriness is the logical
relation between the claim alleged in the complaint and that in the counterclaim. Such relationship
exists when conducting separate trials of the respective claims of the parties would entail
substantial duplication of time and effort by the parties and the court; when the multiple claims
involve the same factual and legal issues; or when the claims are offshoots of the same basic
controversy between the parties. If these tests result in affirmative answers, the counterclaim
is compulsory.[54] (Emphases and underscoring supplied)
Based on the abovementioned standards, the Court finds that the counterclaim of respondents is
permissive in nature. This is because: (a) the issue in the main case, i.e., whether or not
respondents are liable to pay lease rentals, is entirely different from the issue in the
counterclaim, i.e., whether or not petitioner and Kathryn are liable for damages for taking over the
possession of the leased premises and harvesting and appropriating respondents' crops planted
therein; (b) since petitioner and respondents' respective causes of action arose from completely
different occurrences, the latter would not be barred by res judicata had they opted to litigate its
counterclaim in a separate proceeding; (c) the evidence required to prove petitioner's claim that
respondents failed to pay lease rentals is likewise different from the evidence required to prove
respondents' counterclaim that petitioner and Kathryn are liable for damages for performing acts
in bad faith; and (d) the recovery of petitioner's claim is not contingent or dependent upon proof of
respondents' counterclaim, such that conducting separate trials will not result in the substantial
duplication of the time and effort of the court and the parties.
In view of the finding that the counterclaim is permissive, and not compulsory as held by the
courts a quo, respondents are required to pay docket fees. However, it must be clarified that
respondents' failure to pay the required docket fees, per se, should not necessarily lead to the
dismissal of their counterclaim. It has long been settled that while the court acquires jurisdiction
34
over any case only upon the payment of the prescribed docket fees, its non-payment at the time (respondents) the amount of P900,000.00, which represents the unpaid lease rentals for the crop
of filing of the initiatory pleading does not automatically cause its dismissal provided that: (a) the years 1999 to 2004 as above-discussed. Moreover, a judgment lien shall be imposed on the
fees are paid within a reasonable period; and (b) there was no intention on the part of the claimant monetary award given to respondents corresponding to the unpaid docket fees on the permissive
to defraud the government.[55] counterclaim. Accordingly, the Clerk of Court of the Regional Trial Court of Dumaguete City,
Branch 36, or his duly authorized deputy, is hereby ordered to enforce the judgment lien and to
Here, respondents cannot be faulted for non-payment of docket fees in connection with their assess and collect the appropriate docket fees from respondents.
counterclaim, primarily because as early as November 16, 2006, the RTC had already found such
counterclaim to be compulsory in nature.[56] Such finding was then upheld in the July 2, 2007 RTC SO ORDERED.
Decision and affirmed on appeal by the CA in its assailed Decision. As such, the lower courts did
not require respondents to pay docket fees and even proceeded to rule on their entitlement
thereto. Verily, respondents' reliance on the findings of the courts a quo, albeit erroneous, exhibits
their good faith in not paying the docket fees, much more their intention not to defraud the
government. Thus, the counterclaim should not be dismissed for nonpayment of docket fees.
Instead, the docket fees required shall constitute a judgment lien on the monetary awards in
respondents' favor. In Intercontinental Broadcasting Corporation v. Legasto,[57] citing, Section 2,
Rule 141[58] of the Rules of Court, the Court held that in instances where a litigant's non-payment
of docket fees was made in good faith and without any intention of defrauding the government,
the clerk of court of the court a quo should be ordered to assess the amount of deficient docket
fees due from such litigant, which will constitute a judgment lien on the amount awarded to him,
and enforce such lien,[59]as in this case.

That being said, the Court now resolves whether or not respondents are indeed entitled to their
counterclaim.

III.

In this case, the RTC found that under the lease contract, petitioner and Kathryn were bound to
keep respondents in peaceful and adequate enjoyment of the leased premises for the entire
duration of the lease and that respondents faithfully paid their lease rentals for a period of four (4)
years, or until crop year 1998. Despite the foregoing, petitioner and Kathryn unlawfully took
possession (sometime in December 1998) and harvested respondents' crops over their objections.
The RTC further found that due to such unlawful dispossession of the leased
premises, respondents were deprived of profits for six (6) crop years (i.e., from crop year
1999 to crop year 2004, which was the last crop year of the lease) in the amount of
P1,731,996.96 per year, or a grand total of P10,391,987.76.[60] Such factual findings were then
affirmed by the CA in its assailed ruling. It has long been settled that factual findings of the trial
court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal, [61] save
for certain exceptions,[62] which petitioner failed to show in this case. As such, the grant of said
counterclaim is upheld.

Nonetheless, the Court finds it proper to deduct from the counterclaim award of P10,391,987.76
the amount of P900,000.00, which represents the lease rentals that should have been paid by the
lessee, i.e., respondents, during the six (6) crop years (i.e., crop years 1999 to 2004) that they
were deprived possession of the leased premises. As the Court's counterclaim award of lost profits
during the said period stems from the recognition that the lessor, i.e., petitioner and Kathryn,
should have complied with their obligations to keep respondents in peaceful and adequate
enjoyment of the leased premises for the entire duration of the lease, it is but fair and just that
respondents be also held to their obligations thereunder that is, to pay the lease rentals for the
entire duration of the contract. Perceptibly, respondents' gain of profits during such period
presupposes a valid and subsisting lease contract, which is rendered legally possible if only they
themselves discharged their own obligation to pay the lease rentals therefor.

WHEREFORE, the petition is DENIED. The Decision dated February 28, 2014 and the Resolution
dated October 1, 2015 of the Court of Appeals in CA G.R. CV No. 03710 are
hereby AFFIRMED with MODIFICATION deducting from the counterclaim award of
P10,391,987.76 in favor of the Estate of Rolando Ogsos, Sr. and Rolando Ogsos, Jr.
35
 10. Camaso v. TSM Shipping – Commencement of Actions check, i.e., Metrobank check dated July 6, 2015 under the personal account of a certain Pedro L.
Linsangan, is not a mode of payment sanctioned by the 2009 Internal Rules of the Court of
Camaso alleged that on July 15, 2014, he signed a contract of employment with respondents TSM Appeals (2009 IRCA), which allows only payment in cash, postal money order, certified, manager's
Shipping (Phils), Inc., Utkilen, artd Jones Tulod (respondents) to work as a Second Mate on-board or cashier's checks payable to the CA.[22]
the vessel "M/V Golfstraum," for a period of six (6) months and with basic monthly salary of
US$1,178.00.[4] On October 18, 2014, he joined his vessel of assignment.[5] Prior to said contract, Hence, this petition.
Camaso claimed to have been working for respondents for almost five (5) years and boarded eight
(8) of their vessels.[6]
The Issue Before the Court
Sometime in November 2013, Camaso complained of a noticeable obstruction in his throat which
he described as akin to a "fishbone coupled [with] coughing." [7] By February 2014, his situation The primordial issue for the Court's resolution is whether or not the CA correctly dismissed
worsened as he developed lymph nodules on his jawline, prompting him to request for a medical Camaso's petition for certiorari before it for nonpayment of docket fees.
check-up while in Amsterdam. As Camaso was initially diagnosed with tonsillar cancer, he was
recommended for medical repatriation to undergo extensive treatment. Upon repatriation to the
Philippines on September 8, 2014, he reported at respondents' office and was referred to a certain The Court's Ruling
Dr. Nolasco of St. Luke's Medical Center for testing. After a series of tests, it was confirmed that
Camaso was indeed suffering from tonsillar cancer. [8] Consequently, he underwent eight (8) The petition is meritorious.
chemotherapy sessions and radiation therapy for 35 cycles which were all paid for by respondents.
He likewise received sickwage allowances from the latter.[9] Thereafter, respondents refused to Section 3, Rule 46 of the Rules of Court provides that in original actions filed before the CA, such
shoulder Camaso's medical expenses, thus, forcing the latter to pay for his treatment. Believing as a petition for certiorari, the payment of the corresponding docket fees is required, and that the
that his sickness was work-related and that respondents remained silent on their obligation, failure to comply with the same shall be sufficient ground for the dismissal of such action, viz.:
Camaso filed the instant complaint for disability benefits, sickwage allowance, reimbursement of
medical and hospital expenses, and other consequential damages before the National Labor Section 3. Contents and filing of petition, effect of non-compliance with requirements. - The petition
Relations Commission (NLRC), docketed as NLRC Case No. OFW (M) 07-09270-14. After efforts shall contain the full names and actual addresses of all the petitioners and respondents, a concise
for an amicable settlement between the parties failed, they were ordered to file their respective statement of the matters involved, the factual background of the case, and the grounds relied upon
position papers.[10] for the relief prayed for.

The LA and NLRC Rulings
In a Decision[11] dated November 28, 2014, the Labor Arbiter (LA) ruled in Camaso's favor and,
accordingly, ordered respondents to pay him his total and permanent disability benefits in the
amount of US$60,000.00, plus ten percent (10%) of the total money claims as attorney's fees.
However, the LA dismissed his other monetary claims for lack of merit. [12]
On appeal, docketed as NLRC LAC No. (OFW-M) 01-000088-15,[13] the NLRC promulgated a
Decision[14] dated March 19, 2015 reversing the LA ruling and, consequently, dismissed Camaso's
complaint for lack of merit. Camaso moved for its reconsideration, but was denied in a
Resolution[15] dated April 28, 2015. Aggrieved, he filed a petition for certiorari before the CA.[16]
The CA Ruling
In a Resolution[17] dated August 12, 2015, the CA dismissed Camaso's petition "for non-payment
of the required docketing fees as required under Section 3, Rule 46 of the Revised Rules of
Court."[18]
Dissatisfied, Camaso filed a Motion for Reconsideration[19] dated August 29, 2015, arguing, inter
alia, that a check representing the payment of the required docket fees was attached to a copy of
his petition filed before the CA. He further claimed that upon verification of his counsel's
messenger, the Division Clerk of Court admitted that it was simply overlooked. [20]
In a Resolution[21] dated March 4, 2016, the CA denied Camaso's motion for lack of merit. Citing
the presumption of regularity of official duties, the CA gave credence to the explanation of Myrna
D. Almira, Officer-in-Charge of the CA Receiving Section, that there was no cash, postal money
order, or check attached to Camaso's petition when it was originally filed before the CA. In any
event, the CA held that assuming that a check was indeed attached to the petition, such personal
In actions filed under Rule 65, the petition shall further indicate the material dates showing when
notice of the judgment or final order or resolution subject thereof was received, when a motion for
new trial or reconsideration, if any, was filed and when notice of the denial thereof was received.
x x x x
The petitioner shall pay the corresponding docket and other lawful fees to the clerk of
court and deposit the amount of P500.00 for costs at the time of the filing of the petition.
The failure of the petitioner to comply with any of the foregoing requirements shall be
sufficient ground for the dismissal of the petition. (Emphases and underscoring supplied)
In Bibiana Farms & Mills, Inc. v. NLRC,[23] the Court nevertheless explained that while non-
payment of docket fees may indeed render an original action dismissible, the rule on payment of
docket fees may be relaxed whenever the attending circumstances of the case so warrant:
Under the foregoing rule, non-compliance with any of the requirements shall be a sufficient ground
for the dismissal of the petition. Corollarily, the rule is that a court cannot acquire jurisdiction
over the subject matter of a case, unless the docket fees are paid. And where the filing of
the initiatory pleading is not accompanied by payment of the docket fees, the court may
allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.
In several cases, however, the Court entertained certain exceptions due to the peculiar
circumstances attendant in these cases, which warrant a relaxation of the rules on payment of
docket fees. It was held in La Salette College v. Pilotin [463 Phil. 785 (2003)], that the strict
application of the rule may be qualified by the following: first, failure to pay those fees
within the reglementary period allows only discretionary, not automatic, dismissal; second,
such power should be used by the court in conjunction with its exercise of sound
discretion in accordance with the tenets of justice and fair play, as well as with a great deal
of circumspection in consideration of all attendant circumstances.
36
Thus, in Villamor v. [CA] [478 Phil. 728 (2004)], the Court sustained the decision of the CA to
reinstate the private respondents', appeal despite having paid the docket fees almost one year
after the notice of appeal was filed, finding that there is no showing that the private respondents
deliberately refused to pay the requisite fee within the reglementary period and abandon their
appeal. The Court also found that it was imperative for the CA to review the ruling of the trial court
to avoid a miscarriage of justice. Thus, the Court concluded, "Under the circumstances
obtaining in the case at bar, we see no cogent reason to reverse the resolutions of the
respondent court. It is the policy of the court to encourage hearing of appeals on their
merits. To resort to technicalities which the petitioner capitalizes on in the instant petition
would only tend to frustrate rather than promote substantial justice."[24] (Emphases and
underscoring supplied)
Verily, the failure to pay the required docket fees per se should not necessarily lead to the
dismissal of a case. It has long been settled that while the court acquires jurisdiction over any case
only upon the payment of the prescribed docket fees, its non-payment at the time of filing of the
initiatory pleading does not automatically cause its dismissal provided that: (a) the fees are paid
within a reasonable period; and (b) there was no intention on the part of the claimant to defraud
the government.[25]

Here, it appears that when Camaso filed his certiorari petition through his counsel and via mail, a
Metrobank check dated July 6, 2015 under the account name of Pedro L. Linsangan was attached
thereto to serve as payment of docket fees.[26] Although this was not an authorized mode of
payment under Section 6, Rule VIII[27] of the 2009 IRCA, the attachment of such personal check
shows that Camaso exerted earnest efforts to pay the required docket fees. Clearly, this exhibits
good faith and evinces his intention not to defraud the government. In this relation, the assertion
of the Officer-in-Charge of the CA Receiving Section that there was no check attached to
Camaso's certiorari petition is clearly belied by the fact that when it was examined at the Office of
the Division Clerk of Court, the check was found to be still stapled thereto. [28]

In light of the foregoing circumstances, the Court deems it appropriate to relax the technical rules
of procedure in the interest of substantial justice and, hence, remands the instant case to the CA
for the resolution of its substantial merits.[29] Upon remand, the CA is directed to order Camaso to
pay the required docket fees within a reasonable period of thirty (30) days from notice of such
order.

WHEREFORE, the petition is GRANTED. The Resolutions dated August 12, 2015 and March 4,
2016 of the Court of Appeals (CA) in CA G.R. SP No. 141278-UDK are hereby SET ASIDE.
Accordingly, the instant case is REMANDEDto the CA for further proceedings as discussed in this
Decision.

37
 11. Dynamic Buildrs v. Prisbitero - One Suit for One Action bidders "were considered during the opening of the bids."[7] The prices offered were the following:[8]

Mig-wells Const Corp P35,561,015.33 Highest Bidder

Republic Act No. 8975 does not sanction splitting a cause of action in order for a party to avail ADP Const & Supply P34,778,496.72 3rd Lowest Bidder
itself of the ancillary remedy of a temporary restraining order from this court. Also, this law covers Dynamic Builders & Const P29,750,000.00 Lowest Bidder
only national government infrastructure projects. This case involves a local government HLJ Const & Ent. P31,922,420.27 2nd Lowest Bidder
infrastructure project. On March 27, 2006, the Bids and Awards Committee issued Resolution No. 6 recommending the
award in favor of HLJ Construction and Enterprise.[9]
For local government infrastructure projects, Regional Trial Courts may issue provisional injunctive
reliefs against government infrastructure projects only when (1) there are compelling and On April 18, 2006, the Municipality of Valladolid received its "NO OBJECTION" letter from World
substantial constitutional violations; (2) there clearly exists a right in esse; (3) there is a need to Bank through the LOGOFIND[10] project director, advising the Bids and Awards Committee to
prevent grave and irreparable injuries; (4) there is a demonstrable urgency to the issuance of the proceed with the issuance of the notice of award, letter of acceptance, signing of contract, and
injunctive relief; and (5) when there are public interest at stake in restraining or enjoining the notice to proceed.[11]
project while the action is pending that far outweighs (a) the inconvenience or costs to the party
to whom the project is awarded and (b) the public benefits that will result from the completion of On April 21, 2006, the Bids and Awards Committee issued Resolution No. 7 affirming the award
the project. The time periods for the validity of temporary restraining orders issued by trial courts of contract to HLJ Construction and Enterprise for the construction of the 1,050-lineal-meter
should be strictly followed. No preliminary injunction should issue unless the evidence to support Construction Shoreline Protection Project amounting to P31,922,420.37. [12]
the injunctive relief is clear and convincing.
On April 25, 2006, Bids and Awards Committee Chairperson Celina C. Segunla wrote Engr. Raul
We are asked by Dynamic Builders & Construction Co. (Phil.), Inc. (Dynamic Builders) through F. Balandra of Dynamic Builders and the other participating losing bidders, ADP Construction and
this Petition for prohibition with application for issuance of a temporary restraining order and/or Mig-Wells Construction Corporation, to inform them of the Bids and Awards Committee's findings
writ of preliminary injunction[1]that: and decision.[13] Dynamic Builders was informed that "its bid proposal had been found to be 'not
substantially responsive.'"[14] Dynamic Builders received this decision on May 11, 2006.[15]
1. Upon the filing of this petition, a temporary restraining order and/or writ of preliminary injunction
be immediately issued restraining and enjoining: Dynamic Builders alleged that on May 5, 2006, it submitted the letter dated April 7, 2006 containing
a request for the Bids and Awards Committee to furnish it with all submitted bid documents and
the enforcement or execution of the 12 June 2006 Decision and the 30 June 2006 Resolution relevant Bids and Awards Committee resolutions, but this was denied by the letter dated May 5,
by the Hon. Ricardo P. Presbitero, Jr., Mayor of the Municipality of Valladolid and Head of 2006 invoking confidentiality under Section 2.46 of the LOGOFIND guidelines. [16]
the Procuring Entity in Protest Case No. BPC-01-06 entitled "Dynamic Builders &
Construction Company (Phil.), Inc. v. Bids And Awards Committee, Municipality of Valladolid, On May 15, 2006, the Bids and Awards Committee received the letter from Dynamic Builders
(a)
Negros Occidental" by the respondents, or their agents, or anyone acting in their behalf, or seeking reconsideration of the April 25, 2006 decision declaring Dynamic Builders' bid as not
anyone who stands to benefit from such order, in any manner, during the pendency of the substantially responsive.[17]
proceedings in Civil Case No. 1459 in order not to render further proceedings in Civil Case
No. 1459 moot and academic and any judgment in the said case ineffectual; On May 22, 2006, the Bids and Awards Committee wrote Dynamic Builders denying the request
for reconsideration. It informed Dynamic Builders of the post-evaluation examination results
the implementation of the award of the Construction Shoreline Protection Project subject of showing Dynamic Builders' failure in its Financial Contracting Capability.[18]
Protest Case No. BPC-01-06, during the pendency of Civil Case No. 1459, by the
respondents, or their agents, or anyone acting in their behalf, or anyone who stands to benefit On June 6, 2006, Dynamic Builders lodged a formal protest with the head of the procuring entity,
(b)
from such implementation, in any manner, during the pendency of the proceedings in Civil Mayor Ricardo P. Presbitero, Jr. (Mayor Presbitero), to set aside the Bids and Awards Committee
Case No. 1459 in order not to render further proceedings in Civil Case No. 1459 moot and decision declaring Dynamic Builders' bid as not substantially responsive. [19]
any judgment in the said case ineffectual; and
2. Thereafter, a writ of prohibition be issued and/or the preliminary injunction be made permanent Mayor Presbitero dismissed the protest in the Decision[20] dated June 12, 2006.
and continuing, during the pendency of Civil Case No. 1459 before the Regional Trial Court of
Bago City. According to Mayor Presbitero's June 12, 2006 Decision, the bidders underwent preliminary
examination and were "subjected to the criteria of Verification, Eligibility, Bid Security,
Other reliefs just and equitable in the premises are likewise prayed for. [2] Completeness of Bid, Substantial Responsiveness, and Acceptance for Detailed
On December 28, 2005, the Municipality of Valladolid, Negros Occidental, through its Bids and Examination[.]"[21] Mig-wells Construction Corporation did not pass the preliminary examination,
Awards Committee, published an invitation to bid for the construction of a 1,050-lineal-meter while the remaining three that passed were subjected to detailed examination. All three passed
rubble concrete seawall along the municipality's shoreline. [3] This infrastructure venture is known and qualified for post-evaluation examination.[22]
as the "Construction Shoreline Protection Project."[4]
The June 12, 2006 Decision also stated that during the post-evaluation examination, the three
On January 17, 2006, the Bids and Awards Committee conducted a pre-bid conference attended bidders submitted their financial statements for the last five (5) years and other documents
by six (6) prospective contractors including Dynamic Builders.[5] expressly provided in Volume 2 of the Procurement Guidelines Manual of LOGOFIND World
Bank.[23] The examination showed that Dynamic Builders had a negative Financial Contracting
On January 31, 2006, three (3) out of the seven (7) contractors that had secured bidding Capability of P64,579,119.13 due to numerous other contractual commitments or balance of
documents in order to bid "submitted letters of withdrawal." [6] Thus, only the remaining four (4) works.[24] HLJ Construction and Enterprise had a positive Financial Contracting Capability of
P30,921,063.86, while ADP Construction had a positive Financial Contracting Capability of only
38
P12,770,893.78.[25] Section 4.5.e of the Instruction To Bidders requires a minimum Financial For having in fact submitted the Lowest Calculated Responsive Bid, petitioner should be
Contracting Capability of P13,000,000.00.[26] (4) awarded the contract for the Construction of 1,050 Lineal Meter Rubble Concrete Seawall of
the Municipality of Valladolid, Negros Occidental.[42]
Mayor Presbitero denied Dynamic Builders' Motion for Reconsideration in the Resolution[27] dated By Resolution dated September 18, 2006, this court ordered the parties to "MAINTAIN THE
June 30, 2006. STATUS QUO as of September 18, 2006 effective immediately until further orders from the
Court."[43]
On September 4, 2006 and pursuant to Article XVII, Section 58 of Republic Act No. 9184,
otherwise known as the Government Procurement Reform Act, Dynamic Builders filed the Petition In their Comment[44] on the Petition, public respondents counter that petitioner "grossly violated
for Certiorari before the Regional Trial Court of Bago City, Negros Occidental, assailing Mayor the rules against splitting a single cause of action, multiplicity of suits, and forum shopping . . .
Presbitero's Decision and Resolution.[28] [and] availed of an improper remedy and disregarded the rule on 'hierarchy of courts[.]'" [45] The
project undertaken by HLJ Construction 'and Enterprise was almost near completion, and
Simultaneously, Dynamic Builders filed this Petition[29] dated September 4, 2006 for prohibition prohibition [was] not intended to provide a remedy for acts already executed or
with application for temporary restraining order and/or writ of preliminary injunction before this accomplished.'[46] Petitioner should have asked for injunctive relief in Civil Case No. 1459 filed
court.[30] This was received by this court on September 6, 2006. [31] before the trial court.[47]

Petitioner Dynamic Builders submits that Article XVII, Section 58 of Republic Act No. 9184 Public respondents argue that Article XVII, Section 58 of Republic Act No. 9184, Presidential
implicitly allowed it to simultaneously file a Petition for Certiorari before the Regional Trial Court Decree No. 1818, and Republic Act No. 8975 do not envision simultaneous resort to remedies
assailing the protest case on the merits, and another Petition before this court for injunctive before the trial court and this court.[48] They submit that Section 58 provides
remedies.[32] for alternative remedies between an action under Rule 65 before the Regional Trial Court and a
proper action directly before this court.[49]
Petitioner argues that in Section 58, the "law conferring on the Supreme Court the sole jurisdiction
to issue temporary restraining orders and injunctions relating to Infrastructure Project of Public respondents agree that Republic Act No. 8975 only governs national government projects
Government" refers to Republic Act No. 8975[33] in relation to Presidential Decree No. but disagree insofar as petitioner's submission that since Republic Act No. 8975 amended
1818.[34] Petitioner then submits that "while R.A. No. 8975 appears to apply only to national Presidential Decree No. 1818 by removing the restriction on this court to issue injunctive relief, it
government infrastructure projects . . . the resulting amendment to P.D. No. 1818 (by virtue of now covers local government projects.[50]
Sections 3 and 9 of R.A. No. 8975) removing any restriction upon the Honorable Supreme Court
to issue injunctive relief, would similarly apply to the infrastructure projects . . . subject of, or Respondent HLJ Construction and Enterprise similarly raises the issue of petitioner's forum
covered by, P.D. No. 1818, which would include those infrastructure projects undertaken for or by shopping.[51] It adds that due process was not denied, as public respondent notified petitioner of
local governments."[35] its findings and decision, heard petitioner's arguments, and entertained petitioner's motion for
reconsideration.[52] Respondent HLJ Construction and Enterprise stresses that the Construction
Petitioner asserts that J.V. Lagon Construction v. Pangarungan[36] clarified that Regional Trial Shoreline Protection Project's delay will only result in grave injustice and irreparable injury
Courts can issue injunctive relief when it is of "extreme urgency involving a constitutional affecting the people of the Municipality of Valladolid, Negros Occidental.[53]
issue."[37] Nevertheless, petitioner argues that this ruling was an obiter dictum, and J.V.
Lagon involved a national government project.[38] Thus, it only exercised prudence when it took On December 13, 2006, petitioner filed a verified Petition to Cite Respondents for
twin remedial routes.[39] Contempt,[54] alleging that respondents did not cease work on the project in disregard of this court's
status quo order.[55] Respondents filed their respective comments.[56]
The Petition alleges that respondent HLJ Construction and Enterprise already commenced
construction and "obtained the release of the 15% advance . . . for mobilization costs as well as The issues for our resolution are as follows:
partial payments for the portion . . . completed."[40] Petitioner argues that the issuance of a
temporary restraining order and/or preliminary injunction was of extreme urgency, as it was First, whether Article XVII, Section 58 of Republic Act No. 9184 contemplates simultaneous filing
illegally deprived of its constitutional rights to due process and equal protection of law. [41] of a petition for prohibition seeking injunctive reliefs from this court and a petition
for certiorari before the Regional Trial Court; consequently:
The Petition then incorporates by reference its Civil Case No. 1459 Petition's discussion on the
following arguments: a) Whether petitioner violated the rules against the splitting of a cause of action, multiplicity of
suits, and forum shopping;
Petitioner was denied due process when the contract was awarded to private respondent HLJ
(1) Construction and Enterprise without first giving the former an opportunity to avail itself of the b) Whether petitioner violated the doctrine on hierarchy of courts; and
remedies under R.A. No. 9184[;]
c) Whether petitioner resorted to an improper remedy when it filed a petition for prohibition with
The award of the contract to private respondent HLJ Construction and Enterprise violated this court.
(2)
Section 57 of R.A. No. 9184[;] Second, whether Article XVII, Section 58 of Republic Act No. 9184, in relation to Republic Act No.
8975 and Presidential Decree No. 1818, allows Regional Trial Courts to issue injunctive relief
Contrary to the findings of public respondents, the bid submitted by petitioner was subject to the presence of certain conditions; and
(3)
responsive[;] [and]
Lastly, whether respondents violated this court's September 18, 2006 status quo Order in relation
to the ongoing Construction Shoreline Protection Project.

39
 Private respondent alleges that petitioner did not even notify the Regional Trial Court of Bago City,
Negros Occidental, of its Petition filed before this court. [61]
I
The second paragraph of Article XVII, Section 58 of Republic Act No. 9184 simply means it does
We proceed with the procedural issue of whether petitioner availed itself of the wrong remedy in not preclude a direct filing before this court in proper cases.
simultaneously filing (1) a petition for certiorari before the trial court alleging that public respondent
gravely abused its discretion in rendering its June 12, 2006 Decision and June 30, 2006 Resolution The Rules of Court provides for original concurrent jurisdiction by the Regional Trial Court, the
and (2) a petition for prohibition seeking injunctive reliefs from this court to enjoin the enforcement Court of Appeals, and this court in entertaining petitions for certiorari, prohibition, or
of public respondent's June 12, 2006 Decision and June 30, 2006 Resolution during the pendency mandamus.[62] However, parties must adhere to the principle of hierarchy of courts. This was
of the case before the trial court. discussed in Dimson (Manila), Inc., et al. v. Local Water Utilities Administration:[63]

Public respondents submit that a simple reading of the Petition in Civil Case No. 1459 readily
reveals that petitioner also asked the trial court to nullify the same Decision and Resolution on the
identical ground of grave abuse of discretion amounting to lack or excess of jurisdiction.[57]
Petitioner counters that it was compelled to file the separate petitions pursuant to, and in view of,
Article XVII, Section 58 of Republic Act No. 9184: [58]
Sec. 58. Report to Regular Courts; Certiorari. - Court action may be resorted to only after the
protests contemplated in this Article shall have been completed. Cases that are filed in violation
of the process specified in this Article shall be dismissed for lack of jurisdiction. The regional trial
court shall have jurisdiction over final decisions of the head of the procuring entity. Court
actions shall be governed by Rule 65 of the 1997 Rules of Civil Procedure.
This provision is without prejudice to any law conferring on the Supreme Court the sole
jurisdiction to issue temporary restraining orders and injunctions relating to Infrastructure
Projects of Government. (Emphasis supplied)
Section 58 could not have envisioned a simultaneous resort to this court by one that had already
filed an action before the Regional Trial Court without violating the basic rules on proscription
against the splitting of a cause of action, multiplicity of suits, and forum shopping.
Rule 2, Section 3 of the Rules of Court provides that "[a] party may not institute more than one
suit for a single cause of action." Moreover, Section 4 discusses the splitting of a single cause of
action in that "if two or more suits are instituted on the basis of the same cause of action, the filing
of one or a judgment upon the merits in any one is available as a ground for the dismissal of the
others." The splitting of a cause of action "violate[s] the policy against multiplicity of suits, whose
primary objective [is] to avoid unduly burdening the dockets of the courts."[59]
This Petition seeks to enjoin the execution of public respondent's Decision and Resolution on the
protest the same Decision and Resolution sought to be set aside in the Petition before the
Regional Trial Court. In essence, petitioner seeks the same relief through two separate Petitions
filed before separate courts. This violates the rule against forum shopping.
Rule 7, Section 5 of the Rules of Court requires the plaintiff or principal party to certify under oath
that he or she has not commenced any action involving the same issues in any court. This court
has discussed this rule against forum shopping:
In essence, forum shopping is the practice of litigants resorting to two different fora for the purpose
of obtaining the same relief, to increase their chances of obtaining a favorable judgment. In
determining whether forum shopping exists, it is important to consider the vexation caused to the
courts and the parties-litigants by a person who asks appellate courts and/or administrative entities
to rule on the same related causes and/or to grant the same or substantially the same relief, in the
process creating the possibility of conflicting decisions by the different courts or fora on the same
issues. We have ruled that forum shopping is present when, in two or more cases pending, there
is identity of (1) parties (2) rights or causes of action and reliefs prayed for and (3) the identity of
the two preceding particulars is such that any judgment rendered in the other action, will,
regardless of which party is successful, amount to res judicata in the action under consideration.[60]
Clearly, the proper recourse to a court action from decisions of the BAC, such as this one, is to
file a certiorari not before the Supreme Court but before the regional trial court which is vested by
R.A. No. 9184 with jurisdiction to entertain the same. In the recent case of First United
Constructors Corporation v. Poro Point Management Corporation, we held that while indeed
the certiorari jurisdiction of the regional trial court is concurrent with this Court's, that fact alone
does not allow an unrestricted freedom of choice of the court forum. But since this is not an iron-
clad rule and the full discretionary power to take cognizance of and assume jurisdiction over
special civil actions for certiorari directly filed with the Court may actually be exercised by it, it is
nevertheless imperative that the Court's intervention be called for by exceptionally compelling
reasons or be warranted by the nature of the issues involved. In other words, a direct invocation
of the Supreme Court's original jurisdiction to issue the writ will be allowed only when there are
special and important reasons clearly and specifically set out in the petition.[64] (Citations omitted)
The hierarchy of courts must be respected. The doctrine with respect to hierarchy of courts was
designed so that this court will have more time to focus on its constitutional tasks without the need
to deal with causes that also fall within the lower courts' competence.[65] This court acts on petitions
for extraordinary writs under Rule 65 "only when absolutely necessary or when serious and
important reasons exist to justify an exception to the policy."[66]
Consistent with these rules and doctrines, the remedy contemplated by Article XVII, Section 58 of
Republic Act No. 9184 is either an action under Rule 65 before the Regional Trial Court or the
proper action filed before this court. However, direct resort to this court can prosper only when the
requisites for direct invocation of this court's original jurisdiction are present.
II
Prohibition is a preventive remedy. This court has held that injunctive remedies will not lie for acts
already accomplished.[67]
The acts sought to be enjoined in this case included the implementation of the Construction
Shoreline Protection Project awarded to private respondent HLJ Construction and Enterprise. The
project had already commenced and had been ongoing at the time petitioner filed this case.
Moreover, the issue of whether these acts infringed on petitioner's rights is a matter interrelated
with the issues raised in the Petition before the trial court, emphasizing the existence of the splitting
of a cause of action.
In any case, this court has stressed that extraordinary writs of certiorari, prohibition, and
mandamus are "prerogative writs of equity[.]"[68] It is within the court's sound discretion whether
these writs should be granted, and it will need to ensure that there is a clear right to the relief. [69]
Prohibition is defined as "an extraordinary remedy available to compel any tribunal, corporation,
board, or person exercising judicial or ministerial functions, to desist from further [proceeding] in
an action or matter when the proceedings in such tribunal, corporation, board or person are without
or in excess of jurisdiction or with grave abuse of discretion[.]"[70]
40
Grave abuse of discretion will prosper as a ground for prohibition when it is shown that "there was
. . . capricious and whimsical exercise of judgment . . . equivalent to lack of jurisdiction or that the
tribunal, corporation, board or person has exercised its power in an arbitrary or despotic manner
by reason of passion or personal hostility."[71]
First, public respondent had jurisdiction to rule on the protest since it was then head of the
procuring entity.[72]
Second, this court need not look into petitioner's allegation that its Petition before the Regional
Trial Court raised grounds warranting the reversal of public respondent's Decision. [73] The merits
of whether there was grave abuse of discretion by public respondent were already subject of the
Petition before the trial court. Petitioner cannot be allowed to seek the same relief from this court.
Rule 65 likewise requires that there be "no appeal or any . . . plain, speedy, [or] adequate remedy
in the ordinary course of law."[74] Section 3 of Republic Act No. 8975 provides for such a remedy
when it gave an exception to the general rule prohibiting lower courts from issuing provisional
injunctive relief against national government projects:
Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions. - No court, except the Supreme Court, shall issue any
temporary restraining order, preliminary injunction or preliminary mandatory injunction against the
government, or any of its subdivisions, officials or any person or entity, whether public or private,
acting under the government's direction, to restrain, prohibit or compel the following acts:
. . . .
This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited, to cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply when the matter is of
extreme urgency involving a constitutional issue, such that unless a temporary restraining order is
issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount
to be fixed by the court, which bond shall accrue in favor of the government if the court should,
finally decide that the applicant was not entitled to the relief sought. (Emphasis supplied)
When the matter is of "extreme urgency involving a constitutional issue," even Regional Trial
Courts may grant injunctive reliefs as explained in Republic v. Nolasco:[75]
Republic Act No. 8975 definitively enjoins all courts, except the Supreme Court, from issuing any
temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the
government, or any of its subdivisions, officials or any person or entity to restrain, prohibit or
compel the bidding or awarding of a contract or project of the national government, precisely the
situation that obtains in this case with respect to the Agno River Project. The only exception
would be if the matter is of extreme urgency involving a constitutional issue, such that
unless the temporary restraining order is issued, grave injustice and irreparable injury will
arise.[76] (Emphasis supplied, citations omitted)
Considering that petitioner alleges that this matter is "of extreme urgency, involving as it does the
. . . constitutional right[s] to due process and equal protection of the law,"[77] it should have prayed
for injunctive relief before the trial court where its Petition for Certiorari via Rule 65 was pending,
together with a bond fixed by the court.
Mere allegation or invocation that constitutionally protected rights were violated will not
automatically result in the issuance of injunctive relief. The plaintiff or the petitioner should
discharge the burden to show a clear and compelling breach of a constitutional provision.
Violations of constitutional provisions are easily alleged, but trial courts should scrutinize diligently
and deliberately the evidence showing the existence of facts that should support the conclusion
that a constitutional provision is clearly and convincingly breached. In case of doubt, no injunctive
relief should issue. In the proper cases, the aggrieved party may then avail itself of special civil
actions and elevate the matter.
This court adheres to the policy behind the prohibition under Republic Act No. 8975 and even
issued Administrative Circular No. 11-2000 entitled Re: Ban on the Issuance of Temporary
Restraining Orders or Writs of Preliminary Prohibitory or Mandatory Injunctions in Cases Involving
Government Infrastructure Projects. This circular enjoins lower court judges to strictly comply with
Republic Act No. 8975.
However, the issue here does not involve the propriety of a lower court's issuance or non-issuance
of provisional injunctive relief, but petitioner's insistence that only this court can issue such
injunctive relief in justifying its simultaneous Petitions before the Regional Trial Court and this
court.
Petitioner hinges its erroneous simultaneous Petitions on its reading of Republic Act No. 8975 in
relation to Presidential Decree No. 1818.
III
Petitioner submits that only this court has the power to issue injunctions to enjoin government
infrastructures including those of local government.[78]
Petitioner explains that the "laws" referred to in Article XVII, Section 58 of Republic Act No. 9184
refer to Republic Act No. 8975 that prohibits courts, except the Supreme Court, from issuing
temporary restraining orders and injunctions against government infrastructure projects. It adds
that Republic Act No. 8975 must be taken in relation to Presidential Decree No. 1818 prohibiting
the issuances by the courts of restraining orders or injunctions involving infrastructure
projects.[79] The full text of Presidential Decree No. 1818 promulgated in 1981 reads:
PRESIDENTIAL DECREE NO. 1818
PROHIBITING COURTS FROM ISSUING RESTRAINING ORDERS OR PRELIMINARY
INJUNCTIONS IN CASES INVOLVING INFRASTRUCTURE AND NATURAL RESOURCE
DEVELOPMENT PROJECTS OF, AND PUBLIC UTILITIES OPERATED BY, THE
GOVERNMENT.
WHEREAS, Presidential Decree No. 605 prohibits the issuance by the courts of restraining orders
or injunctions in cases involving concessions, licenses, and other permits issued by administrative
officials or bodies for the exploitation, development and utilization of natural resources of the
country;
WHEREAS, it is in the public interest to adopt a similar prohibition against the issuance of such
restraining orders or injunctions in other areas of activity equally critical to the economic
development effort of the nation, in order not to disrupt or hamper the pursuit of essential
government projects;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the
powers vested in me by the Constitution, do hereby decree and order as follows:
Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order,
preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy
involving an infrastructure project, or a mining, fishery, forest or other natural resource
development project of the government, or any public utility operated by the government, including
among others public utilities for the transport of the goods or commodities, stevedoring and
arrastre contracts, to prohibit any person or persons, entity or government official from proceeding
with, or continuing the execution or implementation of any such project, or the operation of such
public utility, or pursuing any lawful activity necessary for such execution, implementation or
operation.
41

Section 2. This decree shall take effect immediately. (Emphasis supplied)
In 2000, Republic Act No. 8975 was passed. Section 3 of the law provides:
Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions. - No court, except the Supreme Court, shall issue any
temporary restraining order, preliminary injunction or preliminary mandatory injunction against the
government or any of its subdivisions, officials or any person or entity, whether public or private,
acting under the government's direction, to restrain, prohibit or compel the following acts:
(a) Acquisition, clearance and development of the right-of-way and/or site or location of
any nationalgovernment project;
(b) Bidding or awarding of contract/project of the national government as defined under Section 2
hereof;
(c) Commencement, prosecution, execution, implementation, operation of any such contract or
project;
(d) Termination or rescission of any such contract/project; and
(e) The undertaking or authorization of any other lawful activity necessary for such contract/project.
This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply when the matter is of
extreme urgency involving a constitutional issue, such that unless a temporary restraining order is
issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount
to be fixed by the court, which bond shall accrue in favor of the government if the court should
finally decide that the applicant was not entitled to the relief sought.
If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or
order a rebidding of the same, without prejudice to any liability that the guilty party may incur under
existing laws. (Emphasis supplied)
Petitioner submits that since the repealing clause of Republic Act No. 8975 has "amended
accordingly" Presidential Decree No. 1818, the prohibition no longer extends to this
court.[80] Section 9 reads:
Sec. 9. Repealing Clause. - All laws, decrees, including Presidential Decree Nos. 605, 1818 and
Republic Act No. 7160, as amended, orders, rules and regulations or parts thereof inconsistent
with this Act are hereby repealed or amended accordingly.[81]
Petitioner argues that even if Republic Act No. 8975 only mentions national government
infrastructure projects, Section 9 has accordingly amended Presidential Decree No. 1818, such
that the projects covered by this earlier law, like those undertaken by local governments, are
similarly covered by the removal of the prohibition against this court.[82]
In other words, petitioner contends that based on these laws, only this court can issue injunctive
relief against local government infrastructure projects. Thus, it was constrained to simultaneously
file two separate Petitions before the Regional Trial Court and this court.
We cannot agree.
There is nothing in Republic Act No. 8975 or in Presidential Decree No. 1818 that allows the
simultaneous availment of legal remedies before the Regional Trial Court and this court.
Republic Act No. 8975, even when read with Presidential Decree No. 1818, does not sanction the
splitting of a cause of action in order for a party to avail itself of the ancilliary remedy of a temporary
restraining order from this court.
Petitioner's reading of Republic Act No. 8975's repealing clause, such that only this court can issue
injunctive relief, fails to persuade.
This court has set the limit on the prohibition found in Presidential Decree No. 1818 by explaining
that lower courts are not prohibited from enjoining administrative acts when questions of law exist
and the acts do not involve administrative discretion in technical cases:
Although Presidential Decree No. 1818 prohibits any court from issuing injunctions in cases
involving infrastructure projects, the prohibition extends only to the issuance of injunctions or
restraining orders against administrative acts in controversies involving facts or the exercise of
discretion in technical cases. On issues clearly outside this dimension and involving questions of
law, this Court declared that courts could not be prevented from exercising their power to restrain
or prohibit administrative acts. In such cases, let the hammer fall and let it fall hard. [83] (Emphasis
supplied, citations omitted)
We also consider the second paragraph of Republic Act No. 8975, Section 3 on the exception to
the prohibition:
This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply when the matter is of
extreme urgency involving a constitutional issue, such that unless a temporary restraining order is
issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount
to be fixed by the court, which bond shall accrue in favor of the government if the court should
finally decide that the applicant was not entitled to the relief sought. (Emphasis supplied)
In other words, the Regional Trial Court can issue injunctive relief against government
infrastructure projects, even those undertaken by local governments, considering that the
prohibition in Section 3 of Republic Act No. 8957 only mentions national government projects.
These courts can issue injunctive relief when there are compelling constitutional violations only
when the right is clear, there is a need to prevent grave and irreparable injuries, and the public
interest at stake in restraining or enjoining the project while the action is pending far outweighs the
inconvenience or costs to the party to whom the project is awarded.
Republic Act No. 8975 mentions the constitutional provision in that "[t]he use of property bears a
social function, and all economic agents shall contribute to the common good."[84]
Statute cannot be interpreted as to violate protected rights. Thus, the above conditions safeguard
against lower court issuances of provisional injunctive relief in cases not falling within the
exception.
These safeguards are also consistent with the law's policy for the expeditious implementation of
government projects that ultimately benefit the public:
Section 1. Declaration of Policy. - Article XII, Section 6 of the Constitution states that the use of
property bears a social function, and all economic agents shall contribute to the common good.
Towards this end, the State shall ensure the expeditious and efficient- implementation and
completion of government infrastructure projects to avoid unnecessary increase in construction,
maintenance and/or repair costs and to immediately enjoy the social and economic benefits
therefrom.[85] (Emphasis supplied)
There is no need for this court to labor on petitioner's arguments regarding violations of due
process and equal protection of the law and the alleged grave injustice and irreparable injury
petitioner suffered. The Petition's incorporation of its discussion on these arguments, as made in
its Petition before the Regional Trial Court docketed as Civil Case No. 1459, only emphasizes the
splitting of a cause of action committed.
In any event, the general rule of prohibition under Republic Act No. 8975 does not preclude lower
42
courts from assuming jurisdiction when the ultimate relief prayed for is to nullify a national the time the September 18, 2006 Resolution was issued.
government infrastructure project and its implementation:
This is consistent with Republic Act No. 8975's policy that "the State shall ensure the expeditious
However, it must be clarified that Republic Act No. 8975 does not ordinarily warrant the outright and efficient implementation and completion of government infrastructure projects to avoid
dismissal of any complaint or petition before the lower courts seeking permanent injunctive relief unnecessary increase in construction, maintenance and/or repair costs and to immediately enjoy
from the implementation of national government infrastructure projects. What is expre'ssly the social and economic benefits therefrom."[97] This policy declaration does not distinguish
prohibited by the statute is the issuance of the provisional reliefs of temporary restraining orders, between national and local government infrastructure projects. Delay in the project will only mean
preliminary injunctions, and preliminary mancatory injunctions. It does not preclude the lower additional costs for the government and prejudice to the people of the Municipality of Valladolid
courts from assuming jurisdiction over complaints or petitions that seek as ultimate relief the who will directly benefit from the Construction Shoreline Protection Project.
nullification or implementation of a national government infrastructure project. A statute such as
Republic Act No. 8975 cannot diminish the constitutionally mandated judicial power to determine WHEREFORE, considering the foregoing, the Petition is DISMISSED for lack of merit. The
whether or not there has been a grave abuse of discretion amounting to excess of jurisdiction on verified Petition to Cite Respondents for Contempt dated December 11, 2006 is
the part of any branch or instrumentality of government. Section 3 of the law in fact mandates, likewise DISMISSED for lack of merit.
thus:
SO ORDERED.
If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or
order a rebidding of the same, without prejudice to any liability that the guilty party may incur under
existing laws.
Thus, when a court is called upon to rule on an initiatory pleading ing any material aspect pertinent
to a national government infrastructure project, the court ordinarily may not dismiss the action
based solely on Republic Act No. 8975 but is merely enjoined from granting provisional reliefs. If
no other ground obtains to dismiss the action, the court should decide the case on the
merits.[86] (Emphasis supplied, citation omitted)
IV

We decide on petitioner's verified Petition to Cite Respondent for Contempt alleging violation of
this court's September 18, 2006 status quo Order.

In its Comment, private respondent HLJ Construction and Enterprise explains that it has no
intention to disobey the Resolution. Its decision to continue the Construction Shoreline Protection
Project was based on the definition of "status quo," meaning the "present, current, existing state
of affairs."[87]

"The present[,] existing condition on September 18, 2006, was the ongoing
construction."[88] Moreover, petitioner's rights were not violated as its bid was declared as "not
substantially responsive."[89] In the absence of a clear legal right, no injunction can be granted.[90]

Similarly, public respondent contends in its Comment that the Construction Shoreline Protection
Project commenced as early as May 8, 2006.[91] At the time the Petition was filed in September
2006, the Construction Shoreline Protection Project had been ongoing for four (4)
months.[92] Thus, the status quo as of the September 18, 2006 Resolution was that the project was
ongoing.[93]

This court has explained that status quo should be the one existing at the time of the filing of the
case:

The status quo should be that existing at the time of the filing of the case. The status quo usually
preserved by a preliminary injunction is the last actual, peaceable and uncontested status which
preceded the actual controversy. The status quo ante litem is, ineluctably, the state of affairs which
is existing at the time of the filing of the case. Indubitably, the trial court must not make use of its
injunctive power to alter such status.[94] (Emphasis supplied, citations omitted)
The ordinary meaning of status quo is "the existing state of affairs[,]"[95] while status quo ante refers
to "the state of affairs that existed previously." [96]

Relying in good faith on the ordinary meaning of status quo as differentiated from status quo ante,
respondents pushed through with the construction, which had been the existing state of affairs at
43
 12. Relucio v. Lopez - Parties to Civil Action On June 21, 1994, petitioner filed with the Court of Appeals a petition for certiorari assailing the
trial court's denial of her motion to dismiss.[4]
The Case
On May 31, 1996, the Court of Appeals promulgated a decision denying the petition.[5] On June
[1] [2]
The case is a petition for review on certiorari seeking to set aside the decision of the Court of 26, 1996, petitioner filed a motion for reconsideration.[6] However, on April 6, 1999, the Court of
Appeals that denied a petition for certiorari assailing the trial court's order denying petitioner's Appeals denied petitioner's motion for reconsideration. [7]
motion to dismiss the case against her inclusion as party defendant therein.
Hence, this appeal.[8]
The Facts
The Issues
The facts, as found by the Court of Appeals, are as follows:
1. Whether respondent's petition for appointment as sole administratrix of the conjugal
"On September 15, 1993, herein private respondent Angelina Mejia Lopez (plaintiff below) filed a
property, accounting, etc. against her husband Alberto J. Lopez established a cause of
petition for "APPOINTMENT AS SOLE ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF
action against petitioner.
PROPERTIES, FORFEITURE, ETC.," against defendant Alberto Lopez and petitioner Imelda
Relucio, docketed as Spec. Proc. M-3630, in the Regional Trial Court of Makati, Branch 141. In
2. Whether petitioner's inclusion as party defendant is essential in the proceedings for a
the petition, private-respondent alleged that sometime in 1968, defendant Lopez, who is legally
complete adjudication of the controversy.[9]
married to the private respondent, abandoned the latter and their four legitimate children; that he
arrogated unto himself full and exclusive control and administration of the conjugal properties,
spending and using the same for his sole gain and benefit to the total exclusion of the private The Court's Ruling
respondent and their four children; that defendant Lopez, after abandoning his family, maintained
an illicit relationship and cohabited with herein petitioner since 1976. We grant the petition. We resolve the issues in seriatim.

"It was further alleged that defendant Lopez and petitioner Relucio, during their period of First issue: whether a cause of action exists against petitioner in the proceedings below. "A cause
cohabitation since 1976, have amassed a fortune consisting mainly of stockholdings in Lopez- of action is an act or omission of one party the defendant in violation of the legal right of the
owned or controlled corporations, residential, agricultural, commercial lots, houses, apartments other."[10] The elements of a cause of action are:
and buildings, cars and other motor vehicles, bank accounts and jewelry. These properties, which
are in the names of defendant Lopez and petitioner Relucio singly or jointly or their dummies and a right in favor of the plaintiff by whatever means and under whatever law it arises or is
(1)
proxies, have been acquired principally if not solely through the actual contribution of money, created;
property and industry of defendant Lopez with minimal, if not nil, actual contribution from petitioner
Relucio. an obligation on the part of the named defendant to respect or not to violate such right;
(2)
and
"In order to avoid defendant Lopez obligations as a father and husband, he excluded the private
respondent and their four children from sharing or benefiting from the conjugal properties and the an act or omission on the part of such defendant in violation of the right of the plaintiff or
income or fruits there from. As such, defendant Lopez either did not place them in his name or (3) constituting a breach of the obligation of the defendant to the plaintiff for which the latter
otherwise removed, transferred, stashed away or concealed them from the private- may maintain an action for recovery of damages.[11]
respondent. He placed substantial portions of these conjugal properties in the name of petitioner
Relucio. A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were
admitted or proved.[12]
"It was also averred that in the past twenty five years since defendant Lopez abandoned the
private-respondent, he has sold, disposed of, alienated, transferred, assigned, canceled, removed In order to sustain a motion to dismiss for lack of cause of action, the complaint must show that
or stashed away properties, assets and income belonging to the conjugal partnership with the the claim for relief does not exist, rather than that a claim has been merely defectively stated or is
private-respondent and either spent the proceeds thereof for his sole benefit and that of petitioner ambiguous, indefinite or uncertain.[13]
Relucio and their two illegitimate children or permanently and fraudulently placed them beyond
the reach of the private-respondent and their four children. Hence, to determine the sufficiency of the cause of action alleged in Special Proceedings M-3630,
we assay its allegations.
"On December 8, 1993, a Motion to Dismiss the Petition was filed by herein petitioner on the
ground that private respondent has no cause of action against her. In Part Two on the "Nature of [the] Complaint," respondent Angelina Mejia Lopez summarized the
causes of action alleged in the complaint below.
"An Order dated February 10, 1994 was issued by herein respondent Judge denying petitioner
Relucio's Motion to Dismiss on the ground that she is impleaded as a necessary or indispensable The complaint is by an aggrieved wife against her husband.
party because some of the subject properties are registered in her name and defendant Lopez, or
solely in her name. Nowhere in the allegations does it appear that relief is sought against petitioner. Respondent's
causes of action were all against her husband.
"Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the Order of the
respondent Judge dated February 10, 1994 but the same was likewise denied in the Order dated The first cause of action is for judicial appointment of respondent as administratrix of the
May 31, 1994."[3] conjugal partnership or absolute community property arising from her marriage to Alberto J.
44
Lopez. Petitioner is a complete stranger to this cause of action. Article 128 of the Family Code Lopez.
refers only to spouses, to wit:
Nor can petitioner be a necessary party in Special Proceedings M-3630. A necessary party as
"If a spouse without just cause abandons the other or fails to comply with his or her obligations to one who is not indispensable but who ought to be joined as party if complete relief is to be
the family, the aggrieved spouse may petition the court for receivership, for judicial separation of accorded those already parties, or for a complete determination or settlement of the claim subject
property, or for authority to be the sole administrator of the conjugal partnership property xxx" of the action.[20] In the context of her petition in the lower court, respondent would be accorded
The administration of the property of the marriage is entirely between them, to the exclusion of all complete relief if Alberto J. Lopez were ordered to account for his alleged conjugal partnership
other persons. Respondent alleges that Alberto J. Lopez is her husband. Therefore, her first property with respondent, give support to respondent and her children, turn over his share in the
cause of action is against Alberto J. Lopez. There is no right-duty relation between petitioner and co-ownership with petitioner and dissolve his conjugal partnership or absolute community property
respondent that can possibly support a cause of action. In fact, none of the three elements of a with respondent.
cause of action exists.
The Judgment
The second cause of action is for an accounting "by respondent husband."[14] The accounting of
conjugal partnership arises from or is an incident of marriage. WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of
Appeals.[21] The Court DISMISSES Special Proceedings M-3630 of the Regional Trial Court,
Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no Makati, Branch 141 as against petitioner.
cause of action can exist against petitioner on this ground.
No costs.
Respondent's alternative cause of action is for forfeiture of Alberto J. Lopez' share in the co-owned
property "acquired during his illicit relationship and cohabitation with [petitioner]" [15] and for the SO ORDERED.
"dissolution of the conjugal partnership of gains between him [Alberto J. Lopez] and the
[respondent]."

The third cause of action is essentially for forfeiture of Alberto J. Lopez' share in property co-owned
by him and petitioner. It does not involve the issue of validity of the co-ownership between Alberto
J. Lopez and petitioner. The issue is whether there is basis in law to forfeit Alberto J. Lopez' share,
if any there be, in property co-owned by him with petitioner.

Respondent's asserted right to forfeit extends to Alberto J. Lopez' share alone. Failure of Alberto
J. Lopez to surrender such share, assuming the trial court finds in respondent's favor, results in a
breach of an obligation to respondent and gives rise to a cause of action.[16] Such cause of action,
however, pertains to Alberto J. Lopez, not petitioner.

The respondent also sought support. Support cannot be compelled from a stranger.

The action in Special Proceedings M-3630 is, to use respondent Angelina M. Lopez' own words,
one by "an aggrieved wife against her husband."[17] References to petitioner in the common and
specific allegations of fact in the complaint are merely incidental, to set forth facts and
circumstances that prove the causes of action alleged against Alberto J. Lopez.

Finally, as to the moral damages, respondent's claim for moral damages is against Alberto J.
Lopez, not petitioner.

To sustain a cause of action for moral damages, the complaint must have the character of an
action for interference with marital or family relations under the Civil Code.

A real party in interest is one who stands "to be benefited or injured by the judgment of the
suit."[18] In this case, petitioner would not be affected by any judgment in Special Proceedings M-
3630.

If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable
party is one without whom there can be no final determination of an action. [19] Petitioner's
participation in Special Proceedings M-3630 is not indispensable. Certainly, the trial court can
issue a judgment ordering Alberto J. Lopez to make an accounting of his conjugal partnership with
respondent, and give support to respondent and their children, and dissolve Alberto J. Lopez'
conjugal partnership with respondent, and forfeit Alberto J. Lopez' share in property co-owned by
him and petitioner. Such judgment would be perfectly valid and enforceable against Alberto J.
45
 13. De Castro v. CA - Parties to Civil Action
Before us is a Petition for Review on Certiorari1 seeking to annul the Decision of the Court of
Appeals2 dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto the decision3 of the
Regional Trial Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court
disposed as follows:
"WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro
jointly and solidarily liable to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney's fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991."
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners
Constante A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity)
to collect the unpaid balance of his broker's commission from the De Castros.4 The Court of
Appeals summarized the facts in this wise:
"x x x. Appellants5 were co-owners of four (4) lots located at EDSA corner New York
and Denver Streets in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit
"A-1, p. 144, Records), appellee6 was authorized by appellants to act as real estate
broker in the sale of these properties for the amount of P23,000,000.00, five percent
(5%) of which will be given to the agent as commission. It was appellee who first found
Times Transit Corporation, represented by its president Mr. Rondaris, as prospective
buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually,
sometime in May of 1985, the sale of lots 14 and 15 was consummated. Appellee
received from appellants P48,893.76 as commission.
It was then that the rift between the contending parties soon emerged. Appellee
apparently felt short changed because according to him, his total commission should
be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid by
Times Transit Corporation to appellants for the two (2) lots, and that it was he who
introduced the buyer to appellants and unceasingly facilitated the negotiation which
ultimately led to the consummation of the sale. Hence, he sued below to collect the
balance of P303,606.24 after having received P48,893.76 in advance.1âwphi1.nêt
On the other hand, appellants completely traverse appellee's claims and essentially
argue that appellee is selfishly asking for more than what he truly deserved as
commission to the prejudice of other agents who were more instrumental in the
consummation of the sale. Although appellants readily concede that it was appellee who
first introduced Times Transit Corp. to them, appellee was not designated by them as
their exclusive real estate agent but that in fact there were more or less eighteen (18)
others whose collective efforts in the long run dwarfed those of appellee's, considering
that the first negotiation for the sale where appellee took active participation failed and
it was these other agents who successfully brokered in the second negotiation. But
despite this and out of appellants' "pure liberality, beneficence and magnanimity",
appellee nevertheless was given the largest cut in the commission (P48,893.76),
although on the principle of quantum meruit he would have certainly been entitled to
less. So appellee should not have been heard to complain of getting only a pittance
when he actually got the lion's share of the commission and worse, he should not have
been allowed to get the entire commission. Furthermore, the purchase price for the two
lots was only P3.6 million as appearing in the deed of sale and not P7.05 million as
alleged by appellee. Thus, even assuming that appellee is entitled to the entire
commission, he would only be getting 5% of the P3.6 million, or P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of
two lots in Cubao, Quezon City. The handwritten authorization letter signed by Constante clearly
established a contract of agency between Constante and Artigo. Thus, Artigo sought prospective
buyers and found Times Transit Corporation ("Times Transit" for brevity). Artigo facilitated the
negotiations which eventually led to the sale of the two lots. Therefore, the Court of Appeals
decided that Artigo is entitled to the 5% commission on the purchase price as provided in the
contract of agency.
Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for failure to implead
as indispensable parties the other co-owners of the two lots. The Court of Appeals explained that
it is not necessary to implead the other co-owners since the action is exclusively based on a
contract of agency between Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial court did not err in admitting parol
evidence to prove the true amount paid by Times Transit to the De Castros for the two lots. The
Court of Appeals ruled that evidence aliunde could be presented to prove that the actual purchase
price was P7.05 million and not P3.6 million as appearing in the deed of sale. Evidence aliunde is
admissible considering that Artigo is not a party, but a mere witness in the deed of sale between
the De Castros and Times Transit. The Court of Appeals explained that, "the rule that oral evidence
is inadmissible to vary the terms of written instruments is generally applied only in suits between
parties to the instrument and strangers to the contract are not bound by it." Besides, Artigo was
not suing under the deed of sale, but solely under the contract of agency. Thus, the Court of
Appeals upheld the trial court's finding that the purchase price was P7.05 million and not P3.6
million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO
IMPLEAD INDISPENSABLE PARTIES-IN-INTEREST;
46
 II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT
ARTIGO'S CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY DAMAGES,
AND ATTORNEY'S FEES.
The Court's Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to implead other co-owners
as indispensable parties
The De Castros argue that Artigo's complaint should have been dismissed for failure to implead
all the co-owners of the two lots. The De Castros claim that Artigo always knew that the two lots
were co-owned by Constante and Corazon with their other siblings Jose and Carmela whom
Constante merely represented. The De Castros contend that failure to implead such indispensable
parties is fatal to the complaint since Artigo, as agent of all the four co-owners, would be paid with
funds co-owned by the four co-owners.
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the court's action in the litigation,
and without whom no final determination of the case can be had.7 The joinder of indispensable
parties is mandatory and courts cannot proceed without their presence. 8 Whenever it appears to
the court in the course of a proceeding that an indispensable party has not been joined, it is the
duty of the court to stop the trial and order the inclusion of such party. 9
However, the rule on mandatory joinder of indispensable parties is not applicable to the instant
case.
There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984
to sell the properties of the De Castros for P23 million at a 5 percent commission. The authority
was on a first come, first serve basis. The authority reads in full:
"24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our real estate broker in
connection with the sale of our property located at Edsa Corner New York & Denver,
Cubao, Quezon City.
Asking price P 23,000,000.00 with 5% commission as agent's fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis –CAC"
Constante signed the note as owner and as representative of the other co-owners. Under this
note, a contract of agency was clearly constituted between Constante and Artigo. Whether
Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners
as indispensable parties. The De Castros admit that the other co-owners are solidarily liable
under the contract of agency,10 citing Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the agent for all the consequences of the
agency.
The solidary liability of the four co-owners, however, militates against the De Castros' theory that
the other co-owners should be impleaded as indispensable parties. A noted commentator
explained Article 1915 thus –
"The rule in this article applies even when the appointments were made by the principals
in separate acts, provided that they are for the same transaction. The solidarity arises
from the common interest of the principals, and not from the act of constituting
the agency. By virtue of this solidarity, the agent can recover from any principal
the whole compensation and indemnity owing to him by the others. The parties,
however, may, by express agreement, negate this solidary responsibility. The solidarity
does not disappear by the mere partition effected by the principals after the
accomplishment of the agency.
If the undertaking is one in which several are interested, but only some create the
agency, only the latter are solidarily liable, without prejudice to the effects of negotiorum
gestio with respect to the others. And if the power granted includes various transactions
some of which are common and others are not, only those interested in each transaction
shall be liable for it."11
When the law expressly provides for solidarity of the obligation, as in the liability of co-principals
in a contract of agency, each obligor may be compelled to pay the entire obligation. 12 The agent
may recover the whole compensation from any one of the co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors.
This article reads:
47
 Art. 1216. The creditor may proceed against any one of the solidary debtors or some or
all of them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as
the debt has not been fully collected.
Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.13 that –
"x x x solidarity does not make a solidary obligor an indispensable party in a suit
filed by the creditor. Article 1216 of the Civil Code says that the creditor `may proceed
against anyone of the solidary debtors or some or all of them simultaneously'."
(Emphasis supplied)
Second Issue: whether Artigo's claim has been extinguished by full payment, waiver or
abandonment
The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given "his
proportionate share and no longer entitled to any balance." According to them, Artigo was just one
of the agents involved in the sale and entitled to a "proportionate share" in the commission. They
assert that Artigo did absolutely nothing during the second negotiation but to sign as a witness in
the deed of sale. He did not even prepare the documents for the transaction as an active real
estate broker usually does.
The De Castros' arguments are flimsy.
A contract of agency which is not contrary to law, public order, public policy, morals or good custom
is a valid contract, and constitutes the law between the parties. 14 The contract of agency entered
into by Constante with Artigo is the law between them and both are bound to comply with its terms
and conditions in good faith.
The mere fact that "other agents" intervened in the consummation of the sale and were paid their
respective commissions cannot vary the terms of the contract of agency granting Artigo a 5 percent
commission based on the selling price. These "other agents" turned out to be employees of Times
Transit, the buyer Artigo introduced to the De Castros. This prompted the trial court to observe:
"The alleged `second group' of agents came into the picture only during the so-called
`second negotiation' and it is amusing to note that these (sic) second group, prominent
among whom are Atty. Del Castillo and Ms. Prudencio, happened to be employees of
Times Transit, the buyer of the properties. And their efforts were limited to convincing
Constante to 'part away' with the properties because the redemption period of the
foreclosed properties is around the corner, so to speak. (tsn. June 6, 1991).
xxx
To accept Constante's version of the story is to open the floodgates of fraud and deceit.
A seller could always pretend rejection of the offer and wait for sometime for others to
renew it who are much willing to accept a commission far less than the original
broker. The immorality in the instant case easily presents itself if one has to
consider that the alleged `second group' are the employees of the buyer, Times
Transit and they have not bettered the offer secured by Mr. Artigo for P7 million.
It is to be noted also that while Constante was too particular about the unrenewed real
estate broker's license of Mr. Artigo, he did not bother at all to inquire as to the licenses
of Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-40)."15 (Emphasis supplied)
In any event, we find that the 5 percent real estate broker's commission is reasonable and within
the standard practice in the real estate industry for transactions of this nature.
The De Castros also contend that Artigo's inaction as well as failure to protest estops him from
recovering more than what was actually paid him. The De Castros cite Article 1235 of the Civil
Code which reads:
Art. 1235. When the obligee accepts the performance, knowing its incompleteness and
irregularity, and without expressing any protest or objection, the obligation is deemed
fully complied with.
The De Castros' reliance on Article 1235 of the Civil Code is misplaced. Artigo's acceptance of
partial payment of his commission neither amounts to a waiver of the balance nor puts him in
estoppel. This is the import of Article 1235 which was explained in this wise:
"The word accept, as used in Article 1235 of the Civil Code, means to take as
satisfactory or sufficient, or agree to an incomplete or irregular performance. Hence,
the mere receipt of a partial payment is not equivalent to the required acceptance
of performance as would extinguish the whole obligation."16(Emphasis supplied)
There is thus a clear distinction between acceptance and mere receipt. In this case, it is evident
that Artigo merely received the partial payment without waiving the balance. Thus, there is no
estoppel to speak of.
The De Castros further argue that laches should apply because Artigo did not file his complaint in
court until May 29, 1989, or almost four years later. Hence, Artigo's claim for the balance of his
commission is barred by laches.
Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do
that which by exercising due diligence could or should have been done earlier. It is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled
to assert it either has abandoned it or declined to assert it.17
Artigo disputes the claim that he neglected to assert his rights. He was appointed as agent on
January 24, 1984. The two lots were finally sold in June 1985. As found by the trial court, Artigo
demanded in April and July of 1985 the payment of his commission by Constante on the basis of
the selling price of P7.05 million but there was no response from Constante. 18 After it became
clear that his demands for payment have fallen on deaf ears, Artigo decided to sue on May 29,
1989.
Actions upon a written contract, such as a contract of agency, must be brought within ten years
from the time the right of action accrues.19 The right of action accrues from the moment the breach
of right or duty occurs. From this moment, the creditor can institute the action even as the ten-year
prescriptive period begins to run.20
The De Castros admit that Artigo's claim was filed within the ten-year prescriptive period. The De
Castros, however, still maintain that Artigo's cause of action is barred by laches. Laches does not
48
apply because only four years had lapsed from the time of the sale in June 1985. Artigo made a
demand in July 1985 and filed the action in court on May 29, 1989, well within the ten-year
prescriptive period. This does not constitute an unreasonable delay in asserting one's right. The
Court has ruled, "a delay within the prescriptive period is sanctioned by law and is not
considered to be a delay that would bar relief."21 In explaining that laches applies only in the
absence of a statutory prescriptive period, the Court has stated -
"Laches is recourse in equity. Equity, however, is applied only in the absence, never
in contravention, of statutory law. Thus, laches, cannot, as a rule, be used to abate
a collection suit filed within the prescriptive period mandated by the Civil Code."22
Clearly, the De Castros' defense of laches finds no support in law, equity or jurisprudence.
Third issue: whether the determination of the purchase price was made in violation of the
Rules on Evidence
The De Castros want the Court to re-examine the probative value of the evidence adduced in the
trial court to determine whether the actual selling price of the two lots was P7.05 million and
not P3.6 million. The De Castros contend that it is erroneous to base the 5 percent commission
on a purchase price of P7.05 million as ordered by the trial court and the appellate court. The De
Castros insist that the purchase price is P3.6 million as expressly stated in the deed of sale, the
due execution and authenticity of which was admitted during the trial.
The De Castros believe that the trial and appellate courts committed a mistake in considering
incompetent evidence and disregarding the best evidence and parole evidence rules. They claim
that the Court of Appeals erroneously affirmed sub silentio the trial court's reliance on the various
correspondences between Constante and Times Transit which were mere photocopies that do not
satisfy the best evidence rule. Further, these letters covered only the first negotiations between
Constante and Times Transit which failed; hence, these are immaterial in determining the final
purchase price.
The De Castros further argue that if there was an undervaluation, Artigo who signed as witness
benefited therefrom, and being equally guilty, should be left where he presently stands. They
likewise claim that the Court of Appeals erred in relying on evidence which were not offered for
the purpose considered by the trial court. Specifically, Exhibits "B", "C", "D" and "E" were not
offered to prove that the purchase price was P7.05 Million. Finally, they argue that the courts a
quo erred in giving credence to the perjured testimony of Artigo. They want the entire testimony
of Artigo rejected as a falsehood because he was lying when he claimed at the outset that he was
a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by the trial court and affirmed by
the Court of Appeals, or P3.6 Million as claimed by the De Castros, is a question of fact and not
of law. Inevitably, this calls for an inquiry into the facts and evidence on record. This we can not
do.
It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze
or weigh the evidence again.23 This Court is not the proper venue to consider a factual issue as it
is not a trier of facts. In petitions for review on certiorari as a mode of appeal under Rule 45, a
petitioner can only raise questions of law. Our pronouncement in the case of Cormero vs. Court
of Appeals24 bears reiteration:
"At the outset, it is evident from the errors assigned that the petition is anchored on a
plea to review the factual conclusion reached by the respondent court. Such task
however is foreclosed by the rule that in petitions for certiorari as a mode of appeal, like
this one, only questions of law distinctly set forth may be raised. These questions have
been defined as those that do not call for any examination of the probative value of the
evidence presented by the parties. (Uniland Resources vs. Development Bank of the
Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court of appeals, et al., 119 Phil.
531; Hernandez vs. Court of Appeals, 149 SCRA 67). And when this court is asked to
go over the proof presented by the parties, and analyze, assess and weigh them to
ascertain if the trial court and the appellate court were correct in according superior
credit to this or that piece of evidence and eventually, to the totality of the evidence of
one party or the other, the court cannot and will not do the same. (Elayda vs. Court of
Appeals, 199 SCRA 349 [1991]). Thus, in the absence of any showing that the findings
complained of are totally devoid of support in the record, or that they are so glaringly
erroneous as to constitute serious abuse of discretion, such findings must stand, for this
court is not expected or required to examine or contrast the oral and documentary
evidence submitted by the parties. (Morales vs. Court of Appeals, 197 SCRA 391 [1991]
citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966])."
We find no reason to depart from this principle. The trial and appellate courts are in a much better
position to evaluate properly the evidence. Hence, we find no other recourse but to affirm their
finding on the actual purchase price.1âwphi1.nêt
Fourth Issue: whether award of moral damages and attorney's fees is proper
The De Castros claim that Artigo failed to prove that he is entitled to moral damages and attorney's
fees. The De Castros, however, cite no concrete reason except to say that they are the ones
entitled to damages since the case was filed to harass and extort money from them.
Law and jurisprudence support the award of moral damages and attorney's fees in favor of Artigo.
The award of damages and attorney's fees is left to the sound discretion of the court, and if such
discretion is well exercised, as in this case, it will not be disturbed on appeal. 25 Moral damages
may be awarded when in a breach of contract the defendant acted in bad faith, or in wanton
disregard of his contractual obligation.26 On the other hand, attorney's fees are awarded in
instances where "the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim."27 There is no reason to disturb the trial court's
finding that "the defendants' lack of good faith and unkind treatment of the plaintiff in refusing to
give his due commission deserve censure." This warrants the award of P25,000.00 in moral
damages and P 45,000.00 in attorney's fees. The amounts are, in our view, fair and reasonable.
Having found a buyer for the two lots, Artigo had already performed his part of the bargain under
the contract of agency. The De Castros should have exercised fairness and good judgment in
dealing with Artigo by fulfilling their own part of the bargain - paying Artigo his 5 percent broker's
commission based on the actual purchase price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of Appeals dated
May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.
SO ORDERED.
49
 14. Orquiola v. CA - Parties to Civil Action
This petition for review seeks the reversal of the decision[1] of the Court of Appeals dated January
28, 1999 in CA-G.R. SP No. 47422, which dismissed the petition to prohibit Judge Vivencio Baclig
of the Regional Trial Court of Quezon City, Branch 77, from issuing a writ of demolition against
petitioners, and the sheriff and deputy sheriff of the same court from implementing an alias writ of
execution. Also assailed is the resolution[2] of the Court of Appeals dated December 29, 1999
which denied petitioners' motion for reconsideration.
The facts are as follows:
Pura Kalaw Ledesma was the registered owner of Lot 689, covered by TCT Nos. 111267 and
111266, in Tandang Sora, Quezon City. This parcel of land was adjacent to certain portions of Lot
707 of the Piedad Estates, namely, Lot 707-A and 707-B, registered in the name of Herminigilda
Pedro under TCT Nos. 16951 and 16952, respectively. On October 29, 1964, Herminigilda sold
Lot 707-A and 707-B to Mariano Lising who then registered both lots and Lot 707-C in the name
of M.B. Lising Realty and subdivided them into smaller lots.
Certain portions of the subdivided lots were sold to third persons including herein petitioners,
spouses Victor and Honorata Orquiola, who purchased a portion of Lot 707-A-2, Lot 5, Block 1 of
the subdivision plan (LRC), Psd-42965. The parcel is now #33 Doña Regina St., Regina Village,
Tandang Sora, Quezon City. The other portions were registered in the name of the heirs of Pedro,
heirs of Lising, and other third persons.
Sometime in 1969, Pura Kalaw Ledesma filed a complaint, docketed as Civil Case No. Q-12918,
with the Regional Trial Court of Quezon City against Herminigilda Pedro and Mariano Lising for
allegedly encroaching upon Lot 689. During the pendency of the action, Tandang Sora
Development Corporation replaced Pura Kalaw Ledesma as plaintiff by virtue of an assignment of
Lot 689 made by Ledesma in favor of said corporation. Trial continued for three decades.
On August 21, 1991, the trial court finally adjudged defendants Pedro and Lising jointly and
severally liable for encroaching on plaintiff's land and ordered them:
(a) to solidarily pay the plaintiff Tandang Sora Dev. Corp. actual damages in the amount of
P20,000 with interest from date of filing of the complaint;
(b) to remove all construction, including barbed wires and fences, illegally constructed by
defendants on plaintiff's property at defendants' expense;
(c) to replace the removed concrete monuments removed by defendants, at their own expense;
(d) to pay attorney's fees in the amount of FIVE THOUSAND PESOS (P5,000.00) with interest
computed from the date of filing of the complaint;
(e) to relocate the boundaries to conform with the Commissioners' Report, particularly, Annexes
"A" and "B" thereof, at the expense of the defendants.[3]
As a result, in February 1998, the Deputy Sheriff of Quezon City directed petitioners, through an
alias writ of execution, to remove the house they constructed on the land they were occupying.
On April 2, 1998, petitioners received a Special Order dated March 30, 1998, from the trial court
stating as follows:
Before the Court for resolution is the "Ex-Parte Motion For The Issuance of A Writ of Demolition,"
filed by plaintiff, through counsel, praying for the issuance of an Order directing the Deputy Sheriff
to cause the removal and/or demolition of the structures on the plaintiff's property constructed by
defendants and/or the present occupants. The defendants-heirs of Herminigilda Pedro filed their
comment on the said Motion.
Considering that the decision rendered in the instant case had become final and executory, the
Court, in its Order of November 14, 1997, directed the issuance of an alias writ of execution for
the enforcement of the said decision. However, despite the service of the said writ to all the
defendants and the present occupants of the subject property, they failed to comply therewith, as
per the Partial Sheriff's Return, dated February 9, 1998, issued by the Deputy Sheriff of this branch
of the Court. Thus, there is now a need to demolish the structures in order to implement the said
decision.
WHEREFORE, the defendants are hereby directed to remove, at their expense, all constructions,
including barbed wires and fences, which defendants constructed on plaintiff's property, within
fifteen (15) days from notice of this Order; otherwise, this Court will issue a writ of demolition
against them.
SO ORDERED.[4]
To prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon City from issuing a writ of
demolition and the Quezon City sheriff from implementing the alias writ of execution, petitioners
filed with the Court of Appeals a petition for prohibition with prayer for a restraining order and
preliminary injunction on April 17, 1998.[5]Petitioners alleged that they bought the subject parcel of
land in good faith and for value, hence, they were parties in interest. Since they were not
impleaded in Civil Case No. Q-12918, the writ of demolition issued in connection therewith cannot
be enforced against them because to do so would amount to deprivation of property without due
process of law.
The Court of Appeals dismissed the petition on January 28, 1999. It held that as buyers and
successors-in-interest of Mariano Lising, petitioners were considered privies who derived their
rights from Lising by virtue of the sale and could be reached by the execution order in Civil Case
No. Q-12918. Thus, for lack of merit, the petition was ordered dismissed.[6]
Petitioners' motion for reconsideration was denied. Hence, this petition, where petitioners aver
that:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE DECISION IN CIVIL
CASE NO. Q-12918 CAN ALSO BE ENFORCED AGAINST THE PETITIONERS EVEN IF THEY
WERE NOT IMPLEADED AS PARTIES THERETO.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT UPHOLDING PETITIONERS' TITLE
DESPITE THEIR BEING BUILDER IN GOOD FAITH AND INNOCENT PURCHASER AND FOR
VALUE.
III.
PETITIONERS ARE ENTITLED TO INJUNCTIVE RELIEF CONSIDERING THAT THEY STAND
TO SUFFER GRAVE AND IRREPARABLE INJURY IF ALIAS WRIT OF EXECUTION AND THE
SPECIAL ORDER ISSUED BY THE COURT A QUO IN CIVIL CASE NO. Q-12918 FOR THE
DEMOLITION OF ALL THE STRUCTURES ON THE DISPUTED PROPERTY WERE
ENFORCED AGAINST THE PETITIONERS WHO WERE NOT EVEN GIVEN THEIR DAY IN
COURT.[7]
For our resolution are the following issues: (1) whether the alias writ of execution may be enforced
against petitioners; and (2) whether petitioners were innocent purchasers for value and builders
in good faith.
On the first issue, petitioners claim that the alias writ of execution cannot be enforced against
them. They argue that the appellate court erred when it relied heavily on our ruling in Vda.
de Medina vs. Cruz[8] in holding that petitioners are successors-in-interest of Mariano Lising, and
50
as such, they can be reached by the order of execution in Civil Case No. Q-12918 even though
they were not impleaded as parties thereto. Petitioners submit that Medina is not applicable in this
case because the circumstances therein are different from the circumstances in the present case.
In Medina, the property in dispute was registered under Land Registration Act No. 496 in 1916
and Original Certificate of Title No. 868 was issued in the name of Philippine Realty Corporation
(PRC). In 1949, Benedicta Mangahas and Francisco Ramos occupied and built houses on the lot
without the PRC's consent. In 1959, PRC sold the lot to Remedios Magbanua. Mangahas and
Ramos opposed and instituted Civil Case No. C-120 to annul the sale and to compel PRC to
execute a contract of sale in their favor. The trial court dismissed the complaint and ordered
Mangahas and Ramos to vacate the lot and surrender possession thereof to Magbanua. The
judgment became final and executory. When Magbanua had paid for the land in full, PRC executed
a deed of absolute sale in her favor and a new title was consequently issued in her name.
Magbanua then sought the execution of the judgment in Civil Case No. C-120. This was opposed
by petitioner Medina who alleged that she owned the houses and lot subject of the dispute. She
said that she bought the houses from spouses Ricardo and Eufrocinia de Guzman, while she
purchased the lot from the heirs of the late Don Mariano San Pedro y Esteban. The latter held the
land by virtue of a Titulo de Composicion Con El Estado Num. 4136, dated April 29, 1894. In
opposing the execution, Medina argued that the trial court did not acquire jurisdiction over her,
claiming that she was not a party in Civil Case No. C-120, thus, she could not be considered as
"a person claiming under" Ramos and Mangahas.
When Medina reached this Court, we held that the decision in Civil Case No. C-120, which had
long become final and executory, could be enforced against petitioner even though she was not a
party thereto. We found that the houses on the subject lot were formerly owned by Mangahas and
Ramos who sold them to spouses de Guzman, who in turn sold them to Medina. Under the
circumstances, petitioner was privy to the two judgment debtors Mangahas and Ramos, and
thus Medina could be reached by the order of execution and writ of demolition issued against the
two. As to the lot under dispute, we sustained Magbanua's ownership over it, she being the holder
of a Torrens title. We declared that a Torrens title is generally conclusive evidence of ownership
of the land referred to therein, and a strong presumption exists that a Torrens title was regularly
issued and valid. A Torrens title is incontrovertible against any informacion possessoria, or other
title existing prior to the issuance thereof not annotated on the Torrens title. Moreover, persons
dealing with property covered by a Torrens certificate of title are not required to go beyond what
appears on its face.
Medina markedly differs from the present case on major points. First, the petitioner
in Medina acquired the right over the houses and lot subject of the dispute after the original action
was commenced and became final and executory. In the present case, petitioners acquired the
lot before the commencement of Civil Case No. Q-12918. Second, the right over the disputed land
of the predecessors-in-interest of the petitioner in Medina was based on a title of doubtful
authenticity, allegedly a Titulo de Composicion Con El Estado issued by the Spanish Government
in favor of one Don Mariano San Pedro y Esteban, while the right over the land of the
predecessors-in-interest of herein petitioners is based on a fully recognized Torrens title. Third,
petitioners in this case acquired the registered title in their own names, while the petitioner
in Medina merely relied on the title of her predecessor-in-interest and tax declarations to prove
her alleged ownership of the land.
We must stress that where a case like the present one involves a sale of a parcel of land under
the Torrens system, the applicable rule is that a person dealing with the registered property need
not go beyond the certificate of title; he can rely solely on the title and he is charged with notice
only of such burdens and claims as are annotated on the title. [9] It is our view here that the
petitioners, spouses Victor and Honorata Orquiola, are fully entitled to the legal protection of their
lot by the Torrens system, unlike the petitioner in the Medina case who merely relied on a
mere Titulo de Composicion.
Coming now to the second issue, were petitioners purchasers in good faith and for value? A buyer
in good faith is one who buys the property of another without notice that some other person has a
right to or interest in such property. He is a buyer for value if he pays a full and fair price at the
time of the purchase or before he has notice of the claim or interest of some other person in the
property.[10] The determination of whether one is a buyer in good faith is a factual issue which
generally is outside the province of this Court to determine in a petition for review. An exception is
when the Court of Appeals failed to take into account certain relevant facts which, if properly
considered, would justify a different conclusion.[11] The instant case is covered by this exception
to the general rule. As found by the Court of Appeals and not refuted by private respondent,
petitioners purchased the subject land in 1964 from Mariano Lising.[12] Civil Case No. Q-12918
was commenced sometime in 1969. The Court of Appeals overlooked the fact that the purchase
of the land took place prior to the institution of Civil Case No. Q-12918. In other words, the sale to
petitioners was made before Pura Kalaw Ledesma claimed the lot. Petitioners could reasonably
rely on Mariano Lising's Certificate of Title which at the time of purchase was still free from any
third party claim. Hence, considering the circumstances of this case, we conclude that petitioners
acquired the land subject of this dispute in good faith and for value.
The final question now is: could we consider petitioners builders in good faith? We note that this
is the first time that petitioners have raised this issue. As a general rule, this could not be done.
Fair play, justice, and due process dictate that parties should not raise for the first time on appeal
issues that they could have raised but never did during trial and even during proceedings before
the Court of Appeals.[13] Nevertheless, we deem it proper that this issue be resolved now, to avoid
circuitous litigation and further delay in the disposition of this case. On this score, we find that
petitioners are indeed builders in good faith.
A builder in good faith is one who builds with the belief that the land he is building on is his, and is
ignorant of any defect or flaw in his title.[14] As earlier discussed, petitioner spouses acquired the
land in question without knowledge of any defect in the title of Mariano Lising. Shortly afterwards,
they built their conjugal home on said land. It was only in 1998, when the sheriff of Quezon City
tried to execute the judgment in Civil Case No. Q-12918, that they had notice of private
respondent's adverse claim. The institution of Civil Case No. Q-12918 cannot serve as notice of
such adverse claim to petitioners since they were not impleaded therein as parties.
As builders in good faith and innocent purchasers for value, petitioners have rights over the subject
property and hence they are proper parties in interest in any case thereon.[15] Consequently,
private respondents should have impleaded them in Civil Case No. Q-12918. Since they failed to
do so, petitioners cannot be reached by the decision in said case. No man shall be affected by
any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment
rendered by the court. In the same manner, a writ of execution can be issued only against a party
and not against one who did not have his day in court. Only real parties in interest in an action are
bound by the judgment therein and by writs of execution and demolition issued pursuant
thereto.[16] In our view, the spouses Victor and Honorata Orquiola have valid and meritorious cause
to resist the demolition of their house on their own titled lot, which is tantamount to a deprivation
of property without due process of law.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated January 28,
1999, and its resolution dated December 29, 1999, in CA-G.R. SP No. 47422, are REVERSED
and SET ASIDE. Respondents are hereby enjoined from enforcing the decision in Civil Case No.
Q-12918 through a writ of execution and order of demolition issued against petitioners. Costs
against private respondent.
SO ORDERED.
15. China Bank v. Oliver - Parties to Civil Action
51
This petition for review1 seeks the reversal of the decision dated June 1, 1998, of the Court of
Appeals in CA-G.R. SP No. 43836, dismissing China Banking Corporation’s petition for certiorari
to annul the two orders of the Regional Trial Court of Muntinlupa City, Branch 276, which earlier
denied petitioner’s motion to dismiss and then declared the bank in default in Civil Case No. 96-
219. The appellate court also denied petitioner’s motion for reconsideration in a resolution dated
September 30, 1998.
The facts of this case are culled from the records.
In August 1995, Pangan Lim, Jr. and a certain Mercedes M. Oliver opened a joint account in China
Banking Corporation (hereinafter Chinabank) at EDSA Balintawak Branch. Lim introduced Oliver
to the bank’s branch manager as his partner in the rice and palay trading business. Thereafter,
Lim and Oliver applied for a P17 million loan, offering as collateral a 7,782 square meter lot located
in Tunasan, Muntinlupa and covered by TCT No. S-50195 in the name of Oliver. The bank
approved the application. On November 17, 1995, Lim and Oliver executed in favor of Chinabank
a promissory note for P16,650,000, as well as a Real Estate Mortgage on the property. The
mortgage was duly registered and annotated on the original title under the custody of the Registry
of Deeds of Makati and on the owner’s duplicate copy in the bank’s possession. The mortgage
document showed Mercedes Oliver’s address to be No. 95 Malakas Street, Diliman, Quezon City.
For brevity, she is hereafter referred to as "Oliver One."
On November 18, 1996, respondent claiming that she is Mercedes M. Oliver with postal office
address at No. 40 J.P. Rizal St., San Pedro, Laguna, filed an action for annulment of mortgage
and cancellation of title with damages against Chinabank, Register of Deeds Atty. Mila G. Flores,
and Deputy Register of Deeds Atty. Ferdinand P. Ignacio. Respondent, whom we shall call as
"Oliver Two," claimed that she was the registered and lawful owner of the land subject of the real
estate mortgage; that the owner’s duplicate copy of the title had always been in her possession;
and that she did not apply for a loan or surrender her title to Chinabank. 2 She prayed that: (1) the
owner’s duplicate copy surrendered to Chinabank as well as the original title with the Registry of
Deeds be cancelled; (2) the mortgage be declared null and void; and (3) the Registry of Deeds be
ordered to issue a new and clean title in her name.3
On January 31, 1997, Chinabank moved to dismiss the case for lack of cause of action and non-
joinder of an indispensable party, the mortgagor.
On March 13, 1997, Judge Norma C. Perello issued an order denying the motion to dismiss,
stating that:
A reading of the COMPLAINT which of course is hypothetically admitted, will show that a valid
judgment can be rendered against defendant. Plaintiff having sufficiently averred that defendants
negligently failed to ascertain the genuineness or not (sic) of the title of the land mortgaged to it
upon the claim of ownership by the mortgagors. Furthermore, the matters alleged in the MOTION
TO DISMISS are all evidentiary which Defendants may substantiate at the appointed hours. 4
On April 7, 1997, Chinabank filed with the Court of Appeals a petition for certiorari with prayer for
the issuance of a writ of preliminary injunction and/or restraining order to enjoin enforcement of
the March 13, 1997 order and further action on the case. The Court of Appeals directed respondent
Oliver Two to file her comment and deferred action on the prayer for the issuance of the preliminary
injunction pending submission of the comment.
On June 30, 1997, respondent Oliver Two moved to declare petitioner Chinabank in default. She
pointed out that since petitioner received the order denying the motion to dismiss on March 21,
1997, it had only until April 7, 1997 to file its answer to the complaint. However, until the filing of
the motion for default, no answer had been filed yet. The trial court granted the motion and
declared petitioner in default in its order dated July 17, 1997, thus:
Acting on the Motion To Declare Defendant Bank in Default, and finding the same to be legally
tenable is granted.
Accordingly, the Defendant Bank is declared in default as summons was served on It as early as
December 16, 1996, but until date they have not filed an Answer nor any responsive pleading and
instead, It filed a Motion to Dismiss, which was denied by this Court on March 13, 1997.
The filing of a CERTIORARI to question the Orders by this Court did not toll the period for
Defendants to answer the complaint.
Therefore, the reglementary period for the filing of responsive pleading has long expired.
Let the case be submitted for Decision based on the complaint.
It is SO ORDERED.5
Consequently, petitioner Chinabank filed a supplemental petition on August 11, 1997, seeking
annulment of the July 17, 1997 order. It argued that the special civil action for certiorari filed in the
Court of Appeals interrupted the proceedings before the trial court, thereby staying the period for
filing the answer.
On June 1, 1998, the Court of Appeals promulgated the assailed decision, finding no grave abuse
of discretion committed by the trial judge in ruling that the Rules of Court provided the manner of
impleading parties to a case and in suggesting that petitioner file an appropriate action to bring
the mortgagor within the court’s jurisdiction. The appellate court said that Rule 6, Section 11 of the
Rules of Court allows petitioner to file a third-party complaint against the mortgagor. As to the
judgment by default, the Court of Appeals said that an order denying the motion to dismiss is
interlocutory and may not be questioned through a special civil action for certiorari. The defendant
must proceed with the case and raise the issues in his motion to dismiss when he appeals to a
higher court. In this case, petitioner Chinabank should have filed its answer when it received the
March 13, 1997 order denying the motion to dismiss. The special civil action for certiorari with the
Court of Appeals did not interrupt the period to file an answer, there being no temporary restraining
order or writ of preliminary injunction issued.
The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition anchored
on the following grounds:
I
SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE DOES NOT APPLY WHERE
THE PARTY WHO WAS NOT IMPLEADED IS AN INDISPENSABLE PARTY; INSTEAD,
SECTION 7, RULE 3 THEREOF, APPLIES.
II
52
THE MORTGAGOR MERCEDES M. OLIVER IS AN INDISPENSABLE PARTY UNDER
SECTION 7, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE, AND MUST THEREFORE
INDISPENSABLY BE JOINED AS A PARTY-DEFENDANT.
III
RESPONDENT’S CAUSE OF ACTION IS ANCHORED ON HER CLAIM AS THE REGISTERED
AND LAWFUL OWNER OF THE PROPERTY IN QUESTION AND THAT HER OWNER’S
DUPLICATE COPY OF THE TITLE (ANNEX "A") IS THE TRUE AND GENUINE TITLE. THUS,
THE ACTION BEFORE THE HONORABLE COURT-A-QUO IS A LAND DISPUTE BETWEEN
TWO (2) PERSONS CLAIMING OWNERSHIP.
IV
THE ANNULMENT OF THE MORTGAGE AND THE CANCELLATION OF ANNEXES "B" AND
"C" AS PRAYED FOR IN THE COMPLAINT IN CIVIL CASE NO. 96-219 ARE INEXTRICABLY
INTERTWINED WITH THE ISSUE OF OWNERSHIP. HENCE, THE LATTER MUST FIRST BE
RESOLVED TO DETERMINE THE FORMER.
V the titles, which is intertwined with the issue of ownership. This being the case, said the petitioner,
THE OWNER’S DUPLICATE COPY OF THE TITLE OF MORTGAGOR MERCEDES M. OLIVER
OWNER’S DUPLICATE COPY CANNOT, IN HER ABSENCE, BE DECLARED NULL AND VOID.
CONSEQUENTLY, INASMUCH AS THE MORTGAGE IN FAVOR OF PETITIONER IS
DEPENDENT UPON THE OWNER’S DUPLICATE COPY OF THE MORTGAGOR, THE
COMPLAINT IN CIVIL CASE NO. 96-219 CAN NOT RESOLVE THE CONTROVERSY WITH
FINALITY.
VI
THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO. 53726, AUGUST 15, 1988,
DOES NOT APPLY INASMUCH AS THE USE OF TERM "INDISPENSABLE PARTY" IN SAID
CASE WAS LOOSELY USED AND IN TRUTH WAS INTENDED TO MEAN "PARTIES-IN-
INTEREST" AS CONTEMPLATED BY SECTION 2, RULE 3 OF THE RULES OF COURT.
VII
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT SANCTIONED THE
TRIAL COURT’S ERROR IN DECLARING DEFENDANT CBC IN DEFAULT FOR FAILURE TO
FILE AN ANSWER, NOTWITHSTANDING THE SETTLED DOCTRINE THAT WHERE AN
INDISPENSABLE PARTY IS NOT IN COURT, THE TRIAL COURT SHOULD NOT PROCEED
BUT INSTEAD SHOULD DISMISS THE CASE.
VIII
THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT AGAINST DEFENDANTS REGISTER
AND DEPUTY REGISTER OF DEEDS NECESSARILY GIVE RISE TO, AND BOLSTERS, THE
CONCLUSION THAT THE OWNER’S DUPLICATE COPY OF TCT NO. S-50195 OF
MORTGAGOR MERCEDES M. OLIVER IS THE GENUINE AND AUTHENTIC COPY.6
For a clearer discussion of the issues in this controversy, we may state them as follows:
1. Is the mortgagor who goes by the name of Mercedes M. Oliver, herein called Oliver
One, an indispensable party in Civil Case No. 96219?
2. Should Section 7 Rule 3 of the 1997 Rules of Civil Procedure7 apply in this case?
3. Did the Court of Appeals err when it sustained the trial court’s declaration that
petitioner was in default?
4. Were the withdrawal and consequent dismissal of the complaint against the Registry
of Deeds’ officials indicative of the authenticity of mortgagor Oliver One’s copy of TCT
No. S-50195?
Petitioner Chinabank alleges that there are two owner’s duplicate copies of TCT No. S-50195
involved in this case and two persons claiming to be the real "MERCEDES MARAVILLA OLIVER."
One is the mortgagor, Oliver One. The other is the respondent, Oliver Two. Respondent’s
complaint before the trial court was one for cancellation of the transfer certificate of title in
petitioner’s possession (Annex B). According to petitioner, the issue below is the genuineness of
the mortgagor Oliver One must necessarily be impleaded for she is the registered owner under
Annex "B." Petitioner argues that mortgagor Oliver One is in a better position to defend her title.
She stands to suffer if it is declared fake. Further, petitioner claims that the validity and
enforceability of the mortgage entirely depends on the validity and authenticity of Annex "B." The
mortgage cannot be declared a nullity without the trial court declaring Annex "B" a nullity. Hence,
mortgagor Oliver One’s participation in the suit is indispensable, according to petitioner. In brief,
what petitioner Chinabank is saying is that it was indispensable for respondent Oliver Two to
implead mortgagor Oliver One in the case before the trial court. Failing to do that, the complaint
of herein respondent Oliver Two should have been dismissed.
Petitioner’s contention is far from tenable. An indispensable party is a party in interest, without
whom no final determination can be had of an action. 8 It is true that mortgagor Oliver One is a
party in interest, for she will be affected by the outcome of the case. She stands to be benefited in
case the mortgage is declared valid, or injured in case her title is declared fake. 9 However,
mortgagor Oliver One’s absence from the case does not hamper the trial court in resolving the
dispute between respondent Oliver Two and petitioner. A perusal of Oliver Two’s allegations in
the complaint below shows that it was for annulment of mortgage due to petitioner’s negligence in
not determining the actual ownership of the property, resulting in the mortgage’s annotation on
TCT No. S-50195 in the Registry of Deeds’ custody. To support said allegations, respondent Oliver
Two had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT, and (2) that
she is not the same person using that name who entered into a deed of mortgage with the
petitioner. This, respondent Oliver Two can do in her complaint without necessarily impleading the
mortgagor Oliver One. Hence, Oliver One is not an indispensable party in the case filed by Oliver
Two.
In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held that a party is not
indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible
from the interest of the other parties and will not necessarily be prejudiced by a judgment which
does complete justice to the parties in court. In this case, Chinabank has interest in the loan which,
however, is distinct and divisible from the mortgagor’s interest, which involves the land used as
collateral for the loan.
53
Further, a declaration of the mortgage’s nullity in this case will not necessarily prejudice mortgagor
Oliver One. The bank still needs to initiate proceedings to go after the mortgagor, who in turn can
raise other defenses pertinent to the two of them. A party is also not indispensable if his presence
would merely permit complete relief between him and those already parties to the action, or will
simply avoid multiple litigation, as in the case of Chinabank and mortgagor Oliver One. 10 The
latter’s participation in this case will simply enable petitioner Chinabank to make its claim against
her in this case, and hence, avoid the institution of another action. Thus, it was the bank who
should have filed a third-party complaint or other action versus the mortgagor Oliver One.

As to the second issue, since mortgagor Oliver One is not an indispensable party, Section 7, Rule
3 of the 1997 Rules of Civil Procedure, which requires compulsory joinder of indispensable parties
in a case, does not apply. Instead, it is Section 11, Rule 3, that applies. 11 Non-joinder of parties is
not a ground for dismissal of an action. Parties may be added by order of the court, either on its
own initiative or on motion of the parties.12 Hence, the Court of Appeals committed no error when
it found no abuse of discretion on the part of the trial court for denying Chinabank’s motion to
dismiss and, instead, suggested that petitioner file an appropriate action against mortgagor Oliver
One. A person who is not a party to an action may be impleaded by the defendant either on the
basis of liability to himself or on the ground of direct liability to the plaintiff.13

Now, the third issue, did the Court of Appeals err when it sustained the trial court’s ruling that
petitioner Chinabank was in default? As found by the Court of Appeals, petitioner did not file its
answer, although it received the March 13, 1997 order denying the motion to dismiss. Instead,
petitioner filed a petition for certiorari under Rule 65 of the Rules of Court. Said petition, however,
does not interrupt the course of the principal case unless a temporary restraining order or writ of
preliminary injunction is issued.14 No such order or writ was issued in this case. Hence, Chinabank
as defendant below was properly declared in default by the trial court, after the 15-day period to
file its answer or other responsive pleading lapsed.

Lastly, were the withdrawal and consequent dismissal of the complaint against officials of the
Registry of Deeds conclusive of the authenticity of mortgagor Oliver One’s copy of TCT No. S-
50195? This is a question of fact, which is not a proper subject for review in this petition. Here, we
are limited only to questions of law,15 as a general rule. Petitioner failed to show that this case falls
under any of the exceptions to this rule. We need not tarry on this issue now.

WHEREFORE, the petition is DENIED for lack of merit. The assailed decision dated June 1, 1998
and the resolution dated September 30, 1998 of the Court of Appeals in CA-G.R. SP No. 43836
are AFFIRMED. Costs against petitioner.

SO ORDERED.

54
 16. Lotte Ph. v. De la Cruz - Parties to Civil Action
This Petition for Review on Certiorari 1 assails the July 9, 2004 decision2 of the Court of Appeals
in CA-G.R. SP No. 72732 and its November 26, 2004 resolution3denying reconsideration thereof.
The established facts of this case are as follows:
Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation.
Petitioners (respondents herein) are among those who were hired and assigned to the
confectionery facility operated by private respondent.
On December 14, 1995 - and yearly thereafter until the year 2000 - 7J Maintenance and Janitorial
Services ("7J") entered into a contract with private respondent to provide manpower for needed
maintenance, utility, janitorial and other services to the latter. In compliance with the terms and
conditions of the service contract, and to accommodate the needs of private respondent for
personnel/workers to do and perform "piece works," petitioners, among others, were hired and
assigned to private respondent as repackers or sealers.
However, either in October, 1999 or on February 9, 2000, private respondent dispensed with their
services allegedly due to the expiration/termination of the service contract by respondent with 7J.
They were either told "hwag muna kayong pumasok at tatawagan na lang kung may gawa"; or
were asked to wait "pag magrereport sila sa trabaho." Unfortunately, petitioners were never called
back to work again.
Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and 7J, for
illegal dismissal, regularization, payment of corresponding backwages and related employment
benefits, 13th month pay, service incentive leave, moral and exemplary damages and attorney's
fees based on total judgment award.4
On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment 5 declaring 7J
as employer of respondents.6 The arbiter also found 7J guilty of illegal dismissal7 and ordered to
reinstate respondents,8 pay P2,374,710.00 as backwages, P713,648.00 as 13th month pay and
P117,000.00 as service incentive leave pay.9
Respondents appealed to the National Labor Relations Commission (NLRC) praying that Lotte be
declared as their direct employer because 7J is merely a labor-only contractor. In its
decision10 dated April 24, 2002, the NLRC found no cogent reason to disturb the findings of the
labor arbiter and affirmed its ruling that 7J is the employer of respondents and solely liable for their
claims.
Respondents' motion for reconsideration was denied by the NLRC in a resolution dated June 18,
2002.
Undaunted, they filed a Petition for Certiorari in the Court of Appeals11 against the NLRC and
Lotte, insisting that their employer is Lotte and not 7J.
Lotte, however, denied that respondents were its employees. It prayed that the petition be
dismissed for failure to implead 7J who is a party interested in sustaining the proceedings in court,
pursuant to Section 3, Rule 46 of the Revised Rules of Civil Procedure.
On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the Labor Arbiter and
the NLRC. In its decision, the Court of Appeals declared Lotte as the real employer of respondents
and that 7J who engaged in labor-only contracting was merely the agent of Lotte. Respondents
who performed activities directly related to Lotte's business were its regular employees under Art.
280 of the Labor Code. As such, they must be accorded security of tenure and their services
terminated only on "just" and "authorized" causes.
Lotte's motion for reconsideration was denied, hence this petition, on the following issues:
8. Whether or not petitioner herein had the burden of proof to establish before the proceedings in
the Court of Appeals that 7J Maintenance and Janitorial Service was not a labor-only contractor.
8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure to comply with
Section 3, Rule 46 in relation to Section 5, Rule 65 of the 1997 Rules of Civil Procedure. 12
We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is an indispensable
party and should have been impleaded in respondents' petition in the Court of Appeals. It claims
that the petition before the Court of Appeals was dismissible for failure to comply with Section
3,13 Rule 46 in relation to Section 514 of Rule 65 of the Revised Rules of Civil Procedure.
Petitioner's contention is tenable.
An indispensable party is a party in interest without whom no final determination can be had of an
action,15 and who shall be joined either as plaintiffs or defendants.16 The joinder of indispensable
parties is mandatory.17 The presence of indispensable parties is necessary to vest the court with
jurisdiction, which is "the authority to hear and determine a cause, the right to act in a
case".18 Thus, without the presence of indispensable parties to a suit or proceeding, judgment of
a court cannot attain real finality.19 The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties but
even as to those present.20
In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected
by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable as the
employer of respondents. The Court of Appeals however rendered Lotte jointly and severally liable
with 7J who was not impleaded by holding that the former is the real employer of respondents.
Plainly, its decision directly affected 7J.
In Domingo v. Scheer,21 we held that the non-joinder of indispensable parties is not a ground for
the dismissal of an action22 and the remedy is to implead the non-party claimed to be
indispensable.23 Parties may be added by order of the court on motion of the party or on its own
initiative at any stage of the action and/or such times as are just. If the petitioner refuses to implead
an indispensable party despite the order of the court, the latter may dismiss the complaint/petition
for the petitioner/plaintiff's failure to comply therefor.24
Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents failed
to include it in their Petition for Certiorari in the Court of Appeals. Hence, the Court of Appeals did
not acquire jurisdiction over 7J. No final ruling on this matter can be had without impleading 7J,
whose inclusion is necessary for the effective and complete resolution of the case and in order to
accord all parties with due process and fair play.
In light of the foregoing, the Court sees no need to discuss the second issue raised by petitioner.
55
WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CA-G.R. SP No. 72732 and
the November 26, 2004 resolution, are SET ASIDE. Let the case be REMANDED to the Court of
Appeals to include 7J Maintenance and Janitorial Services as an indispensable party to the case
for further proceedings.

SO ORDERED.

56
 17. Carabro v. DIngco - Parties to Civil Action 2. The defendant to pay the costs of the suit.

SO ORDERED.5
On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated
as "Kasunduan sa Bilihan ng Karapatan sa Lupa"1 (kasunduan) with Spouses Norberto and Susan
Petitioner’s counsel filed a Notice of Appeal on March 20, 2001.
Dingco (respondents) whereby petitioner agreed to sell his rights over a 648 square meter parcel
of unregistered land situated in Purok III, Tugatog, Orani, Bataan to respondents for ₱38,000.
By the herein challenged Decision dated July 20, 2009,6 the Court of Appeals affirmed that of the
trial court.
Respondents tendered their initial payment of ₱10,000 upon signing of the contract, the remaining
balance to be paid on September 1990.
Petitioner’s motion for reconsideration having been denied by Resolution of January 8, 2010, the
present petition for review was filed by Antonio Carabeo, petitioner’s son, 7 faulting the appellate
Respondents were later to claim that when they were about to hand in the balance of the purchase
court:
price, petitioner requested them to keep it first as he was yet to settle an on-going "squabble" over
the land.
(A)
Nevertheless, respondents gave petitioner small sums of money from time to time which totaled
₱9,100, on petitioner’s request according to them; due to respondents’ inability to pay the amount … in holding that the element of a contract, i.e., an object certain is present in this case.
of the remaining balance in full, according to petitioner.
(B)
By respondents’ claim, despite the alleged problem over the land, they insisted on petitioner’s
acceptance of the remaining balance of ₱18,900 but petitioner remained firm in his refusal,
proffering as reason therefor that he would register the land first. … in considering it unfair to expect respondents who are not lawyers to make judicial
consignation after herein petitioner allegedly refused to accept payment of the balance
of the purchase price.
Sometime in 1994, respondents learned that the alleged problem over the land had been settled
and that petitioner had caused its registration in his name on December 21, 1993 under Transfer
(C)
Certificate of Title No. 161806. They thereupon offered to pay the balance but petitioner declined,
drawing them to file a complaint before the Katarungan Pambarangay. No settlement was
reached, however, hence, respondent filed a complaint for specific performance before the … in upholding the validity of the contract, "Kasunduan sa Bilihan ng Karapatan sa
Regional Trial Court (RTC) of Balanga, Bataan. Lupa," despite the lack of spousal consent, (underscoring supplied)

Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain, and proffering that
the kasunduan not having specified the metes and bounds of the land. In any event, petitioner
alleged that if the validity of the kasunduan is upheld, respondents’ failure to comply with their
reciprocal obligation to pay the balance of the purchase price would render the action premature. (D)
For, contrary to respondents’ claim, petitioner maintained that they failed to pay the balance of
₱28,000 on September 1990 to thus constrain him to accept installment payments totaling ₱9,100. [t]he death of herein petitioner causes the dismissal of the action filed by
respondents; respondents’ cause of action being an action in personam. (underscoring
After the case was submitted for decision or on January 31, 2001, 2 petitioner passed away. The supplied)
records do not show that petitioner’s counsel informed Branch 1 of the Bataan RTC, where the
complaint was lodged, of his death and that proper substitution was effected in accordance with The petition fails.
Section 16, Rule 3, Rules of Court.3
The pertinent portion of the kasunduan reads:8
By Decision of February 25, 2001,4 the trial court ruled in favor of respondents, disposing as
follows:
xxxx

WHEREFORE, premises considered, judgment is hereby rendered ordering:

1. The defendant to sell his right over 648 square meters of land pursuant to the contract
dated July 10, 1990 by executing a Deed of Sale thereof after the payment of P18,900
by the plaintiffs;
Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan, na
may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa ay may sakop na dalawang punong
santol at isang punong mangga, kaya’t ako ay nakipagkasundo sa mag-asawang Norby Dingco
at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa sa halagang ₱38,000.00.

57
x x x x (underscoring supplied)

That the kasunduan did not specify the technical boundaries of the property did not render the
sale a nullity. The requirement that a sale must have for its object a determinate thing is satisfied
as long as, at the time the contract is entered into, the object of the sale is capable of being made
determinate without the necessity of a new or further agreement between the parties. 9 As the
above-quoted portion of the kasunduan shows, there is no doubt that the object of the sale is
determinate.

Clutching at straws, petitioner proffers lack of spousal consent. This was raised only on appeal,
hence, will not be considered, in the present case, in the interest of fair play, justice and due
process.10

Respecting the argument that petitioner’s death rendered respondents’ complaint against him
dismissible, Bonilla v. Barcena11 enlightens:

The question as to whether an action survives or not depends on the nature of the action and the
damage sued for. In the causes of action which survive, the wrong complained [of] affects primarily
and principally property and property rights, the injuries to the person being merely incidental,
while in the causes of action which do not survive, the injury complained of is to the person, the
property and rights of property affected being incidental. (emphasis and underscoring supplied)

In the present case, respondents are pursuing a property right arising from the kasunduan,
whereas petitioner is invoking nullity of the kasunduan to protect his proprietary interest.
Assuming arguendo, however, that the kasunduan is deemed void, there is a corollary obligation
of petitioner to return the money paid by respondents, and since the action involves property
rights,12 it survives.1avvphi1

It bears noting that trial on the merits was already concluded before petitioner died. Since the trial
court was not informed of petitioner’s death, it may not be faulted for proceeding to render
judgment without ordering his substitution. Its judgment is thus valid and binding upon petitioner’s
legal representatives or successors-in-interest, insofar as his interest in the property subject of the
action is concerned.13

In another vein, the death of a client immediately divests the counsel of authority. 14 Thus, in filing
a Notice of Appeal, petitioner’s counsel of record had no personality to act on behalf of the already
deceased client who, it bears reiteration, had not been substituted as a party after his death. The
trial court’s decision had thereby become final and executory, no appeal having been perfected.

WHEREFORE, the petition is DENIED.

SO ORDERED.

58
 18. Juana Complex v. FIl. Estate Parties to Civil Action to show that they had a clear and unmistakable right to the use of La Paz Road; and further
claimed that La Paz Road was a torrens registered private road and there was neither a voluntary
The Facts: nor legal easement constituted over it.[13]

On January 20, 1999, Juana Complex I Homeowners Association, Inc. (JCHA), together with On July 31, 2001, the CA rendered the decision partially granting the petition, the dispositive
individual residents of Juana Complex I and other neighboring subdivisions (collectively referred portion of which reads:
as JCHA, et. al.), instituted a complaint[5] for damages, in its own behalf and as a class suit
representing the regular commuters and motorists of Juana Complex I and neighboring
subdivisions who were deprived of the use of La Paz Road, against Fil-Estate Land, Inc. (Fil- WHEREFORE, the petition is hereby partially GRANTED. The Order dated March 3, 1999 granting
Estate), Fil-estate Ecocentrum Corporation (FEEC), La Paz Housing & Development Corporation the writ of preliminary injunction is hereby ANNULLED and SET ASIDE but the portion of the
(La Paz), and Warbird Security Agency and their respective officers (collectively referred as Fil- Omnibus Order dated June 16, 2000 denying the motion to dismiss is upheld.
Estate, et al.).
SO ORDERED.[14]
The complaint alleged that JCHA, et al. were regular commuters and motorists who constantly
travelled towards the direction of Manila and Calamba; that they used the entry and exit toll gates The CA ruled that the complaint sufficiently stated a cause of action when JCHA, et al. alleged in
of South Luzon Expressway (SLEX) by passing through right-of-way public road known as La Paz their complaint that they had been using La Paz Road for more than ten (10) years and that their
Road; that they had been using La Paz Road for more than ten (10) years; that in August 1998, right was violated when Fil-Estate closed and excavated the road. It sustained the RTC ruling that
Fil-estate excavated, broke and deliberately ruined La Paz Road that led to SLEX so JCHA, et al. the complaint was properly filed as a class suit as it was shown that the case was of common
would not be able to pass through the said road; that La Paz Road was restored by the residents interest and that the individuals sought to be represented were so numerous that it was impractical
to make it passable but Fil-estate excavated the road again; that JCHA reported the matter to the to include all of them as parties. The CA, however, annulled the WPI for failure of JCHA, et al. to
Municipal Government and the Office of the Municipal Engineer but the latter failed to repair the prove their clear and present right over La Paz Road. The CA ordered the remand of the case to
road to make it passable and safe to motorists and pedestrians; that the act of Fil-estate in the RTC for a full-blown trial on the merits.
excavating La Paz Road caused damage, prejudice, inconvenience, annoyance, and loss of
precious hours to them, to the commuters and motorists because traffic was re-routed to narrow Hence, these petitions for review.
streets that caused terrible traffic congestion and hazard; and that its permanent closure would
not only prejudice their right to free and unhampered use of the property but would also cause In G.R. No. 152272, JCHA, et al. come to this Court, raising the following issues:
great damage and irreparable injury.

Accordingly, JCHA, et al. also prayed for the immediate issuance of a Temporary Restraining (A)
Order (TRO)or a writ of preliminary injunction (WPI) to enjoin Fil-Estate, et al. from stopping and
intimidating them in their use of La Paz Road. THE HONORABLE COURT OF APPEALS, IN HOLDING THAT A FULL-BLOWN TRIAL ON
THE MERITS IS REQUIRED TO DETERMINE THE NATURE OF THE LA PAZ ROAD, HAD
On February 10, 1999, a TRO was issued ordering Fil-Estate, et al, for a period of twenty (20) DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
days, to stop preventing, coercing, intimidating or harassing the commuters and motorists from AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION.
using the La Paz Road. [6]
(B)
Subsequently, the RTC conducted several hearings to determine the propriety of the issuance of
a WPI. THE HONORABLE COURT OF APPEALS, IN HOLDING THAT THE PETITIONERS FAILED
[7]
TO SATISFY THE REQUIREMENTS FOR THE ISSUANCE OF A WRIT OF PRELIMINARY
On February 26, 1999, Fil-Estate, et al. filed a motion to dismiss arguing that the complaint failed INJUNCTION, HAD DECIDED NOT IN ACCORD WITH LAW AND WITH THE APPLICABLE
to state a cause of action and that it was improperly filed as a class suit. On March 5, 1999, JCHA, DECISIONS OF THE SUPREME COURT.[15]
et al. filed their comment[8] on the motion to dismiss to which respondents filed a reply.[9]
In G.R. No. 152397, on the other hand, Fil-Estate, et al. anchor their petition on the following
On March 3, 1999, the RTC issued an Order [10] granting the WPI and required JCHA, et al. to post issues:
a bond.

On March 19, 1999, Fil-Estate, et al. filed a motion for reconsideration[11] arguing, among others, I.
that JCHA, et al. failed to satisfy the requirements for the issuance of a WPI. On March 23, 1999,
JCHA, et al. filed their opposition to the motion.[12] The Court of Appeals’ declaration that respondents’ Complaint states a cause of action is
contrary to existing law and jurisprudence.
The RTC then issued its June 16, 2000 Omnibus Order, denying both the motion to dismiss and
the motion for reconsideration filed by Fil-Estate, et al.
II.
Not satisfied, Fil-Estate, et al. filed a petition for certiorari and prohibition before the CA to annul
(1) the Order dated March 3, 1999 and (2) the Omnibus Order dated June 16, 2000. They The Court of Appeals’ pronouncement that respondents’ complaint was properly filed as a
contended that the complaint failed to state a cause of action and that it was improperly filed as a class suit is contrary to existing law and jurisprudence.
class suit. With regard to the issuance of the WPI, the defendants averred that JCHA, et al. failed
59
III.

The Court of Appeals’ conclusion that full blown trial on the merits is required to determine The Court’s Ruling
the nature of the La Paz Road is contrary to existing laws and jurisprudence. [16]
The issues for the Court’s resolution are: (1) whether or not the complaint states a cause of action;
JCHA, et al. concur with the CA that the complaint sufficiently stated a cause of action. They, (2) whether the complaint has been properly filed as a class suit; and (2) whether or not a WPI is
however, disagree with the CA’s pronouncement that a full-blown trial on the merits was warranted.
necessary. They claim that during the hearing on the application of the writ of injunction, they had
sufficiently proven that La Paz Road was a public road and that commuters and motorists of their Section 2, Rule 2 of the Rules of Court defines a cause of action as an act or omission by which
neighboring villages had used this road as their means of access to the San Agustin Church, a party violates the right of another. A complaint states a cause of action when it contains three
Colegio De San Agustin and to SLEX in going to Metro Manila and to Southern Tagalog particularly (3) essential elements of a cause of action, namely:
during the rush hours when traffic at Carmona Entry/Exit and Susana Heights Entry/Exit was at its
worst.
(1) the legal right of the plaintiff,
JCHA, et al. argue that La Paz Road has attained the status and character of a public road or (2) the correlative obligation of the defendant, and
burdened by an apparent easement of public right of way. They point out that La Paz Road is the (3) the act or omission of the defendant in violation of said legal right.[18]
widest road in the neighborhood used by motorists in going to Halang Road and in entering the
SLEX-Halang toll gate and that there is no other road as wide as La Paz Road existing in the The question of whether the complaint states a cause of action is determined by its averments
vicinity. For residents of San Pedro, Laguna, the shortest, convenient and safe route towards regarding the acts committed by the defendant.[19] Thus, it must contain a concise statement of
SLEX Halang is along Rosario Avenue joining La Paz Road. the ultimate or essential facts constituting the plaintiff’s cause of action. [20] To be taken into
account are only the material allegations in the complaint; extraneous facts and circumstances or
Finally, JCHA, et al. argue that the CA erred when it voided the WPI because the public nature of other matters aliunde are not considered.[21]
La Paz Road had been sufficiently proven and, as residents of San Pedro and Biñan, Laguna,
their right to use La Paz Road is undeniable. The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether
or not admitting the facts alleged, the court could render a valid verdict in accordance with the
In their Memorandum,[17] Fil-Estate, et al. explain that La Paz Road is included in the parcels of prayer of said complaint.[22] Stated differently, if the allegations in the complaint furnish sufficient
land covered by Transfer Certificates of Title (TCT) Nos. T-120008, T-90321 and T-90607, all basis by which the complaint can be maintained, the same should not be dismissed regardless of
registered in the name of La Paz. The purpose of constructing La Paz Road was to provide a the defense that may be asserted by the defendant.[23]
passageway for La Paz to its intended projects to the south, one of which was the Juana Complex
I. When Juana Complex I was completed, La Paz donated the open spaces, drainage, canal, and In the present case, the Court finds the allegations in the complaint sufficient to establish a cause
lighting facilities inside the Juana Complex I to the Municipality of Biñan. The streets within the of action. First, JCHA, et al.’s averments in the complaint show a demandable right over La Paz
subdivisions were then converted to public roads and were opened for use of the general public. Road. These are: (1) their right to use the road on the basis of their allegation that they had been
The La Paz Road, not being part of the Juana Complex I, was excluded from the donation. using the road for more than 10 years; and (2) an easement of a right of way has been constituted
Subsequently, La Paz became a shareholder of FEEC, a consortium formed to develop several over the said roads. There is no other road as wide as La Paz Road existing in the vicinity and it
real properties in Biñan, Laguna, known as Ecocentrum Project. In exchange for shares of stock, is the shortest, convenient and safe route towards SLEX Halang that the commuters and motorists
La Paz contributed some of its real properties to the Municipality of Biñan, including the properties may use. Second, there is an alleged violation of such right committed by Fil-Estate, et al. when
constituting La Paz Road, to form part of the Ecocentrum Project. they excavated the road and prevented the commuters and motorists from using the same. Third,
JCHA, et al. consequently suffered injury and that a valid judgment could have been rendered in
Fil-Estate, et al. agree with the CA that the annulment of the WPI was proper since JCHA, et al. accordance with the relief sought therein.
failed to prove that they have a clear right over La Paz Road. Fil-Estate, et al. assert that JCHA,
et al. failed to prove the existence of a right of way or a right to pass over La Paz Road and that With respect to the issue that the case was improperly instituted as a class suit, the Court finds
the closure of the said road constituted an injury to such right. According to them, La Paz Road is the opposition without merit.
a torrens registered private road and there is neither a voluntary nor legal easement constituted
over it. They claim that La Paz Road is a private property registered under the name of La Paz Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
and the beneficial ownership thereof was transferred to FEEC when La Paz joined the consortium
for the Ecocentrum Project.
Sec. 12. Class suit. – When the subject matter of the controversy is one of common or general
Fil-Estate, et al., however, insist that the complaint did not sufficiently contain the ultimate facts to interest to many persons so numerous that it is impracticable to join all as parties, a number of
show a cause of action. They aver the bare allegation that one is entitled to something is an them which the court finds to be sufficiently numerous and representative as to fully protect the
allegation of a conclusion which adds nothing to the pleading. interests of all concerned may sue or defend for the benefit of all. Any party in interest shall have
the right to intervene to protect his individual interest.
They likewise argue that the complaint was improperly filed as a class suit for it failed to show that
JCHA, et al. and the commuters and motorists they are representing have a well-defined The necessary elements for the maintenance of a class suit are: 1) the subject matter of
community of interest over La Paz Road. They claim that the excavation of La Paz Road would controversy is one of common or general interest to many persons; 2) the parties affected are so
not necessarily give rise to a common right or cause of action for JCHA, et al. against them since numerous that it is impracticable to bring them all to court; and 3) the parties bringing the class
each of them has a separate and distinct purpose and each may be affected differently than the suit are sufficiently numerous or representative of the class and can fully protect the interests of
others. all concerned.[24]
60

In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz Road.
As succinctly stated by the CA:
The subject matter of the instant case, i.e., the closure and excavation of the La Paz Road, is
initially shown to be of common or general interest to many persons. The records reveal that
numerous individuals have filed manifestations with the lower court, conveying their intention to
join private respondents in the suit and claiming that they are similarly situated with private
respondents for they were also prejudiced by the acts of petitioners in closing and excavating the
La Paz Road. Moreover, the individuals sought to be represented by private respondents in the
suit are so numerous that it is impracticable to join them all as parties and be named individually
as plaintiffs in the complaint. These individuals claim to be residents of various barangays in Biñan,
Laguna and other barangays in San Pedro, Laguna.
preliminary injunction is separate and distinct from the trial on the merits of the main case. [29] The
evidence submitted during the hearing of the incident is not conclusive or complete for only a
"sampling" is needed to give the trial court an idea of the justification for the preliminary injunction
pending the decision of the case on the merits.[30] There are vital facts that have yet to be
presented during the trial which may not be obtained or presented during the hearing on the
application for the injunctive writ.[31] Moreover, the quantum of evidence required for one is
different from that for the other.[32]cralaw
WHEREFORE, the petitions are DENIED. Accordingly, the July 31, 2001 Decision and February
21, 2002 Resolution of the Court of Appeals in CA-G.R. SP No. 60543 are AFFIRMED.
SO ORDERED.

Anent the issue on the propriety of the WPI, Section 3, Rule 58 of the Rules of Court lays down
the rules for the issuance thereof. Thus:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists
in restraining the commission or continuance of the acts complained of, or in the performance of
an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during
the litigation would probably work injustice to the applicant; or

(c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant
respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

A writ of preliminary injunction is available to prevent a threatened or continuous irremediable

injury to parties before their claims can be thoroughly studied and adjudicated. [25] The requisites
for its issuance are: (1) the existence of a clear and unmistakable right that must be protected;
and (2) an urgent and paramount necessity for the writ to prevent serious damage.[26] For the writ
to issue, the right sought to be protected must be a present right, a legal right which must be
shown to be clear and positive.[27]This means that the persons applying for the writ must show that
they have an ostensible right to the final relief prayed for in their complaint. [28]

In the case at bench, JCHA, et al. failed to establish a prima facie proof of violation of their right
to justify the issuance of a WPI. Their right to the use of La Paz Road is disputable since they
have no clear legal right therein. As correctly ruled by the CA:

Here, contrary to the ruling of respondent Judge, private respondents failed to prove as yet that
they have a clear and unmistakable right over the La Paz Road – which was sought to be protected
by the injunctive writ. They merely anchor their purported right over the La Paz Road on the bare
allegation that they have been using the same as public road right-of-way for more than ten years.
A mere allegation does not meet the standard of proof that would warrant the issuance of the
injunctive writ. Failure to establish the existence of a clear right which should be judicially protected
through the writ of injunction is a sufficient ground for denying the injunction.

Consequently, the case should be further heard by the RTC so that the parties can fully prove
their respective positions on the issues.

Due process considerations dictate that the assailed injunctive writ is not a judgment on the merits
but merely an order for the grant of a provisional and ancillary remedy to preserve the status quo
until the merits of the case can be heard. The hearing on the application for issuance of a writ of
61
 19. Navarro v. Escobido - Parties to Civil Action PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to
pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX &
This is a petition for review on certiorari[1] that seeks to set aside the Court of Appeals (CA) 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the
Decision[2] dated October 16, 2001 and Resolution[3] dated May 29, 2002 in CA-G.R. SP. No. LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in
64701. These CA rulings affirmed the July 26, 2000[4] and March 7, 2001[5] orders of the Regional vain to the great damage and injury of herein plaintiff; xxx
Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarro's
(Navarro) motion to dismiss. 4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or
fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff;

BACKGROUND FACTS xxx

On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case 8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate
Nos. 98-599 (first complaint)[6] and 98-598 (second complaint),[7] before the RTC for replevin delivery of the above-described motor vehicle from defendants unto plaintiff pending the final
and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that determination of this case on the merits and, for that purpose, there is attached hereto an affidavit
the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarro's possession. duly executed and bond double the value of the personal property subject matter hereof to answer
for damages and costs which defendants may suffer in the event that the order for replevin prayed
The first complaint stated: for may be found out to having not been properly issued.
The second complaint contained essentially the same allegations as the first complaint, except
that the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the
1. That plaintiffKAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of motor vehicle leased is described as follows:
Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an
entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines, Make/Type FUSO WITH MOUNTED CRANE
which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO Serial No.FK416K-510528
is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where Motor No.6D14-423403
he may be served with summons and other processes of the Honorable Court; that defendant The second complaint also alleged that Navarro delivered three post-dated checks, each for the
"JOHN DOE" whosereal name and address are at present unknown to plaintiff is hereby joined as amount ofP100,000.00, to Karen Go in payment of the agreed rentals; however, the third check
party defendant as he may be the person in whose possession and custody the personal property was dishonored when presented for payment. [8]
subject matter of this suit may be found if the same is not in the possession of defendant ROGER
NAVARRO; On October 12, 1998[9] and October 14, 1998,[10] the RTC issued writs of replevin for both cases;
as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go.
2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor
vehicles, including hauling trucks and other heavy equipment; In his Answers, Navarro alleged as a special affirmative defense that the two complaints
stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on to Purchase (collectively, the lease agreements) - the actionable documents on which the
August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more complaints were based.
particularly described as follows -
On Navarro's motion, both cases were duly consolidated on December 13, 1999.
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680 In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not
Motor No.6D15-338735 state a cause of action.
Plate No. GHK-378
In response to the motion for reconsideration Karen Go filed dated May 26, 2000, [11] the RTC
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and issued another order dated July 26, 2000 setting aside the order of dismissal. Acting on the
between KARGO ENTERPRISES, then represented by its Manager, the aforementioned presumption that Glenn Go's leasing business is a conjugal property, the RTC held that Karen Go
GLENN O. GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of had sufficient interest in his leasing business to file the action against Navarro. However, the RTC
the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO held that Karen Go should have included her husband, Glenn Go, in the complaint based on
delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND Section 4, Rule 3 of the Rules of Court (Rules).[12]Thus, the lower court ordered Karen Go to file a
THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in motion for the inclusion of Glenn Go as co-plaintiff.
payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF
COMMUNICATIONS - CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, When the RTC denied Navarro's motion for reconsideration on March 7, 2001, Navarro filed a
respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of
credit, the same were dishonored and/or returned by the drawee bank for the common reason discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her
that the current deposit account against which the said checks were issued did not have sufficient complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint
funds to cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of which failed to state a cause of action could not be converted into one with a cause of action by
ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS mere amendment or supplemental pleading.
(P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto
plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO OnOctober 16, 2001, the CA denied Navarro's petition and affirmed the RTC's order.[13] The CA
62
also denied Navarro's motion for reconsideration in its resolution of May 29, 2002, [14] leading to Interestingly, although Navarro admits that Karen Go is the registered owner of the business name
the filing of the present petition. Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According
to Navarro, while the lease contracts were in Kargo Enterprises' name, this was merely a trade
name without a juridical personality, so the actual parties to the lease agreements were Navarro
THE PETITION and Glenn Go, to the exclusion of Karen Go.

Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered
it did not have the requisite juridical personality to sue, the actual parties to the agreement are the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the
himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was complaints when in truth, there was none.
not a real party-in-interest and the complaints failed to state a cause of action.
We do not find Navarro's arguments persuasive.
Navarro posits that the RTC erred when it ordered the amendment of the complaint to include
Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which The central factor in appreciating the issues presented in this case is the business name Kargo
does not state a cause of action cannot be converted into one with a cause of action by a mere Enterprises.The name appears in the title of the Complaint where the plaintiff was identified as
amendment or a supplemental pleading. In effect, the lower court created a cause of action for "KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification
Karen Go when there was none at the time she filed the complaints. was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes.Paragraph 3 continued with the allegation that the defendant "leased
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed from plaintiff a certain motor vehicle" that was thereafter described.Significantly, the Complaint
the theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely specifies and attaches as its integral part the Lease Agreement that underlies the transaction
abused its discretion when it assumed that the leased vehicles are part of the conjugal property between the plaintiff and the defendant.Again, the name KARGO ENTERPRISES entered the
of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles picture as this Lease Agreement provides:
subject of the complaint are her paraphernal properties and the RTC gravely erred when it ordered
the inclusion of Glenn Go as a co-plaintiff. This agreement, made and entered into by and between:

Navarro likewise faults the lower court for setting the trial of the case in the same order that GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the
required Karen Go to amend her complaints, claiming that by issuing this order, the trial court LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager,
violated Rule 10 of the Rules.

Even assuming the complaints stated a cause of action against him, Navarro maintains that the xxx
complaints were premature because no prior demand was made on him to comply with the thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented.
provisions of the lease agreements before the complaints for replevin were filed. In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement
only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease
Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, agreements.
the vehicles were illegally seized from his possession and should be returned to him immediately.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a
Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real natural person, nor a juridical person, as defined by Article 44 of the Civil Code:
interest in the subject of the complaint, even if the lease agreements were signed only by her
husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease Art. 44. The following are juridical persons:
agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that
Navarro's insistence that Kargo Enterprises is Karen Go's paraphernal property is without basis. (1) The State and its political subdivisions;
Based on the law and jurisprudence on the matter, all property acquired during the marriage is (2) Other corporations, institutions and entities for public interest or purpose, created by law; their
presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently personality begins as soon as they have been constituted according to law;
established a cause of action against Navarro. Thus, when the RTC ordered her to include her (3) Corporations, partnerships and associations for private interest or purpose to which the law
husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, grants a juridical personality, separate and distinct from that of each shareholder, partner or
and was not meant to cure the complaints' lack of cause of action. member.
Thus, pursuant to Section 1, Rule 3 of the Rules,[16] Kargo Enterprises cannot be a party to a civil
action. This legal reality leads to the question: who then is the proper party to file an action based
THE COURT'S RULING on a contract in the name of Kargo Enterprises?

We find the petition devoid of merit. We faced a similar question in Juasing Hardware v. Mendoza,[17] where we said:

Karen Go is the real party-in-interest Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law
merely recognizes the existence of a sole proprietorship as a form of business organization
The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in conducted for profit by a single individual, and requires the proprietor or owner thereof to secure
the name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the licenses and permits, register the business name, and pay taxes to the national government. It
judgment in the suit, or the party entitled to the avails of the suit. [15] does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or
defend an action in court.
63
Thus, the complaint in the court below should have been filed in the name of the owner of
Juasing Hardware. The allegation in the body of the complaint would show that the suit is xxx
brought by such person as proprietor or owner of the business conducted under the name This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in
and style Juasing Hardware. The descriptive words "doing business as Juasing Hardware" may managing their conjugal property, i.e., Kargo Enterprises.No need exists, therefore, for one to
be added to the title of the case, as is customarily done.[18] [Emphasis supplied.] obtain the consent of the other before performing an act of administration or any act that does not
This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states: dispose of or encumber their conjugal property.

SEC. 2. Parties in interest. - A real party in interest is the party who stands to Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the
be benefited or injured by the judgment in the suit, or the party entitled to the avails of the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter
suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or or by the spouses in their marriage settlements.In other words, the property relations of the
defended in the name of the real party in interest. husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of
As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from the Family Code and, suppletorily, by the spouses' marriage settlement and by the rules on
or be injured by a judgment in this case. Thus, contrary to Navarro's contention, Karen Go is the partnership under the Civil Code.In the absence of any evidence of a marriage settlement between
real party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of the spouses Go, we look at the Civil Code provision on partnership for guidance.
action because her name did not appear in the Lease Agreement that her husband signed in
behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his A rule on partnership applicable to the spouses' circumstances is Article 1811 of the Civil Code,
capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, which states:
as this is a matter for the trial court to consider in a trial on the merits.
Art. 1811. A partner is a co-owner with the other partners of specific partnership property.
Glenn Go's Role in the Case
The incidents of this co-ownership are such that:
We find it significant that the business name Kargo Enterprises is in the name of Karen T.
Go,[19] who described herself in the Complaints to be "a Filipino, of legal age, married to GLENN (1) A partner, subject to the provisions of this Title and to any agreement between the
O. GO, a resident of Cagayan de Oro City, and doing business under the trade name KARGO partners, has an equal right with his partners to possess specific partnership property for
ENTERPRISES."[20] That Glenn Go and Karen Go are married to each other is a fact never brought partnership purposes; xxx
in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the
of a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties registered under this name; hence, both have an equal right to seek possession of
properties are paraphernal or conjugal properties.To restate the parties' positions, Navarro alleges these properties. Applying Article 484 of the Civil Code, which states that "in default of contracts,
that Kargo Enterprises is Karen Go's paraphernal property, emphasizing the fact that the business or special provisions, co-ownership shall be governed by the provisions of this Title," we find
is registered solely in Karen Go's name.On the other hand, Karen Go contends that while the further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action
business is registered in her name, it is in fact part of their conjugal property. in ejectment with respect to the co-owned property.

The registration of the trade name in the name of one person - a woman - does not necessarily While ejectment is normally associated with actions involving real property, we find that this rule
lead to the conclusion that the trade name as a property is hers alone, particularly when the can be applied to the circumstances of the present case, following our ruling in Carandang v. Heirs
woman is married. By law, all property acquired during the marriage, whether the acquisition of De Guzman.[24] In this case, one spouse filed an action for the recovery of credit, a personal
appears to have been made, contracted or registered in the name of one or both spouses, is property considered conjugal property, without including the other spouse in the action. In
presumed to be conjugal unless the contrary is proved.[21] Our examination of the records of the resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the
case does not show any proof that Kargo Enterprises and the properties or contracts in its name action for the recovery of the credit, we said:
are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the
case.As we emphasized in Castro v. Miat:[22] Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the
spouses Carandang, seems to be either an indispensable or a necessary party.If she is an
Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the indispensable party, dismissal would be proper.If she is merely a necessary party, dismissal is not
marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section
to the husband or to the wife."This article does not require proof that the property was 9, Rule 3.
acquired with funds of the partnership.The presumption applies even when the manner in
which the property was acquired does not appear.[23] [Emphasis supplied.] Article 108 of the Family Code provides:
Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as
a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property. Art. 108.The conjugal partnership shall be governed by the rules on the contract of partnership in
all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their
Article 124 of the Family Code, on the administration of the conjugal property, provides: marriage settlements.
This provision is practically the same as the Civil Code provision it superseded:
Art. 124.The administration and enjoyment of the conjugal partnership property shall
belong to both spouses jointly.In case ofdisagreement, the husband's decision shall prevail, Art. 147.The conjugal partnership shall be governed by the rules on the contract of partnership in
subject to recourse to the court by the wife for proper remedy, which must be availed of within five all that is not in conflict with what is expressly determined in this Chapter.
years from the date of the contract implementing such decision. In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the
other partners of specific partnership property." Taken with the presumption of the conjugal nature
64
of the funds used to finance the four checks used to pay for petitioners' stock subscriptions, and to filing of replevin action
with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes
Quirino and Milagros de Guzman co-owners of the alleged credit. In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro
apparently likens a replevin action to an unlawful detainer.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an
action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant
Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of to Section 2, Rule 60 of the Rules, which states:
co-owned property without the necessity of joining all the other co-owners as co-plaintiffs
because the suit is presumed to have been filed for the benefit of his co-owners. In the latter Sec. 2. Affidavit and bond.
case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code,
which provides that any of the co-owners may bring an action for ejectment, covers all kinds of The applicant must show by his own affidavit or that of some other person who personally knows
action for the recovery of possession. the facts:

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant (a) That the applicant is the owner of the property claimed, particularly describing it, or is
to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, entitled to the possession thereof;
any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-
owners, namely the co-owner who filed the suit for the recovery of the co-owned property, (b) That the property is wrongfully detained by the adverse party, alleging the cause of
is an indispensable party thereto. The other co-owners are not indispensable parties. They are detention thereof according to the best of his knowledge, information, and belief;
not even necessary parties, for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of all co- (c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to
owners.[25] [Emphasis supplied.] law, or seized under a writ of execution or preliminary attachment, or otherwise placed
Under this ruling, either of the spouses Go may bring an action against Navarro to recover under custodia legis, or if so seized, that it is exempt from such seizure or custody; and
possession of the Kargo Enterprises-leased vehicles which they co-own.This conclusion is
consistent with Article 124 of the Family Code, supporting as it does the position that either spouse (d) The actual market value of the property.
may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the
property in question without the other spouse's consent. The applicant must also give a bond, executed to the adverse party in double the value of the
property as stated in the affidavit aforementioned, for the return of the property to the adverse
On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to party if such return be adjudged, and for the payment to the adverse party of such sum as he may
recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to recover from the applicant in the action.
the suit, based on Section 4, Rule 4 of the Rules, which states: We see nothing in these provisions which requires the applicant to make a prior demand on the
possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is
Section 4. Spouses as parties. - Husband and wife shall sue or be sued jointly, except as provided not a condition precedent to an action for a writ of replevin.
by law.
Non-joinder of indispensable parties not ground to dismiss action More importantly, Navarro is no longer in the position to claim that a prior demand is necessary,
as he has already admitted in his Answers that he had received the letters that Karen Go sent
Even assuming that Glenn Go is an indispensable party to the action, we have held in a number him, demanding that he either pay his unpaid obligations or return the leased motor
of cases[26] that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground vehicles.Navarro's position that a demand is necessary and has not been made is therefore totally
for dismissal of action. As we stated in Macababbad v. Masirag:[27] unmeritorious.

Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties WHEREFORE, premises considered, we DENY thepetition for review for lack of merit.Costs
is a ground for the dismissal of an action, thus: against petitioner Roger V. Navarro.

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is SO ORDERED.
ground for dismissal of an action. Parties may be dropped or added by order of the court on motion
of any party or on its own initiative at any stage of the action and on such terms as are just. Any
claim against a misjoined party may be severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead
the indispensable party at any stage of the action.The court, either motu proprio or upon the
motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity
to amend his complaint in order to include indispensable parties.If the plaintiff to whom the order
to include the indispensable party is directed refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion.Only
upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as
a party plaintiff is fully in order.

Demand not required prior

65
 20. Divinagarcica v. Parilla - Parties to Civil Action On reconsideration[21] of Ceruleo and herein respondents Celedonio, Maude, Celestial,
Coronacion, and Cecilia (respondents), the RTC issued an Order[22] dated April 4, 2003 further
Assailed in this petition for review on certiorari[1] are the Decision[2] dated March 26, 2009 and the ordering Santiago to comply with the provisions of the Supplemental Contract dated December
Resolution[3] dated April 6, 2011 of the Court of Appeals (CA) in CA-G.R. CV. No. 80167, which 22, 1989 by paying the amount of P337,887.73 upon the partition of the subject land.
set aside the Decision[4] dated November 29, 2002 and the Order[5] dated April 4, 2003 of the
Regional Trial Court of Iloilo City, Branch 31 (RTC) in Civil Case No. 19003 and, consequently, Dissatisfied, respondents appealed[23] to the CA. Records are bereft of any showing that the other
dismissed Santiago C. Divinagracia's (Santiago) complaint for judicial partition. heirs made similar appeals thereto.

The Facts The CA Ruling

Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter parcel of land located at Cor. In a Decision[24] dated March 26, 2009, the CA set aside the RTC Rulings and, consequently,
Fuentes-Delgado Streets, Iloilo City denominated as Lot 133-B-1-A and covered by Transfer dismissed Santiago's complaint for judicial partition.[25] It held that Felcon's siblings, as well as
Certificate of Title (TCT) No. T-12255 (subject land). [6] During his lifetime, he contracted two Maude's children, are indispensable parties to the judicial partition of the subject land and, thus,
marriages: (a) the first was with Lolita Palermo with whom he had two (2) children, namely, their non-inclusion as defendants in Santiago's complaint would necessarily result in its
Cresencio and Conrado, Jr.; and (b) the second was with Eusela Niangar with whom he had seven dismissal.[26]
(7) children, namely, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo, [7]and
Cebeleo, Sr. Conrado, Sr. also begot three (3) illegitimate children, namely, Eduardo, Rogelio, Aggrieved, the heirs of Santiago[27] moved for reconsideration[28] which was, however, denied in a
and Ricardo.[8]Mateo, Sr. pre-deceased Conrado, Sr. and was survived by his children Felcon, Resolution[29] dated April 6, 2011, hence, this petition instituted by herein petitioner, Ma. Elena R.
Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord. Cebeleo, Sr. also pre-deceased his Divinagracia, as administratrix of Santiago's estate.
father and was survived by his wife, Maude, and children Cebeleo, Jr. and Neobel. [9]

According to Santiago, upon Conrado, Sr.'s death, Cresencio, Conrado, Jr., Felcon (in The Issues Before the Court
representation of his father, Mateo, Sr., and his siblings), Coronacion, Celestial, Cecilia, Rogelio,
Eduardo, and Ricardo sold their respective interests over the subject land to Santiago for a The issues for the Court's resolution are whether or not the CA correctly: (a) ruled that Felcon's
consideration of P447,695.66, as embodied in a Deed of Extrajudicial Settlement or Adjudication siblings and Cebeleo, Sr. and Maude's children are indispensable parties to Santiago's complaint
with Deed of Sale[10] dated November 22, 1989 (subject document),[11]which was, however, not for judicial partition; and (b) dismissed Santiago's complaint for his failure to implead said omitted
signed by the other heirs who did not sell their respective shares, namely, Ceruleo, Celedonio, heirs.
and Maude (in representation of his husband, Cebeleo, Sr., and their children). [12] On December
22, 1989, the same parties executed a Supplemental Contract[13] whereby the vendors-heirs and
Santiago agreed that out of the aforesaid consideration, only P109,807.93 will be paid up front, The Court's Ruling
and that Santiago will only pay the remaining balance of P337,887.73 upon the partition of the
subject land.[14] However, Santiago was not able to have TCT No. T-12255 cancelled and the The petition is partly meritorious.
subject document registered because of Ceruleo, Celedonio, and Maude's refusal to surrender
the said title. This fact, coupled with Ceruleo, Celedonio, and Maude's failure to partition the An indispensable party is one whose interest will be affected by the court's action in the litigation,
subject land, prompted Santiago to file a Complaint[15] dated January 3, 1990 for judicial partition and without whom no final determination of the case can be had. The party's interest in the subject
and for receivership.[16] matter of the suit and in the relief sought are so inextricably intertwined with the other parties' that
his legal presence as a party to the proceeding is an absolute necessity. In his absence, there
For their part, Ceruleo, Celedonio, and Maude maintained that Santiago had no legal right to file cannot be a resolution of the dispute of the parties before the court which is effective, complete,
an action for judicial partition nor compel them to surrender TCT No. T-12255 because, inter alia: or equitable.[30] Thus, the absence of an indispensable party renders all subsequent actions of the
(a) Santiago did not pay the full purchase price of the shares sold to him; and (b) the subject land court null and void, for want of authority to act, not only as to the absent parties but even as to
is a conjugal asset of Conrado Sr. and Eusela Niangar and, thus, only their legitimate issues may those present.[31]
validly inherit the same.[17]
With regard to actions for partition, Section 1, Rule 69 of the Rules of Court requires that all
persons interested in the property shall be joined as defendants, viz.:
The RTC Ruling

In a Decision[18] dated November 29, 2002, the RTC ordered, among others, the partition of the SEC. 1. Complaint in action for partition of real estate. A person having the right to compel the
subject land between Santiago on the one hand, and Ceruleo, Celedonio, Maude, and the heirs partition of real estate may do so as provided in this Rule, setting forth in his complaint the nature
of Mateo, Sr. (i.e., Felcon, et al.) on the other hand and, consequently, the cancellation of TCT and extent of his title and an adequate description of the real estate of which partition is
No. T-12255 and the issuance of a new owner's duplicate certificate in favor of Santiago and the demanded and joining as defendants all other persons interested in the property. (Emphasis
group of Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr.[19] The RTC found that through and underscoring supplied)
the subject document, Santiago became a co-owner of the subject land and, as such, has the right
to demand the partition of the same. However, the RTC held that Santiago did not validly acquire Thus, all the co-heirs and persons having an interest in the property are indispensable parties; as
Mateo, Sr.'s share over the subject land, considering that Felcon admitted the lack of authority to such, an action for partition will not lie without the joinder of the said parties. [32]
bind his siblings with regard to Mateo, Sr.'s share thereon. [20]
66
In the instant case, records reveal that Conrado, Sr. has the following heirs, legitimate and Regional Trial Court of Iloilo City, Branch 31 in Civil Case No. 19003, are
illegitimate, who are entitled to a pro-indiviso share in the subject land, namely: Conrado, Jr., hereby AFFIRMED with MODIFICATION REMANDING the instant case to the court a quo, which
Cresencio, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo, Cebeleo, Sr., Eduardo, is hereby DIRECTED to implead all indispensable parties and, thereafter, PROCEED with the
Rogelio, and Ricardo. However, both Mateo, Sr. and Cebeleo, Sr. pre-deceased Conrado, Sr. resolution of the case on the merits WITH DISPATCH.
and, thus, pursuant to the rules on representation under the Civil Code,[33] their respective interests
shall be represented by their children, namely: (a) for Mateo, Sr.: Felcon, Landelin, Eusela, SO ORDERED.
Giovanni, Mateo, Jr., Tito, and Gaylord; and (b) for Cebeleo, Sr.: Cebeleo, Jr. and Neobel.[34]

The aforementioned heirs whether in their own capacity or in representation of their direct
ascendant have vested rights over the subject land and, as such, should be impleaded as
indispensable parties in an action for partition thereof. However, a reading of Santiago's complaint
shows that as regards Mateo, Sr.'s interest, only Felcon was impleaded, excluding therefrom his
siblings and co-representatives. Similarly, with regard to Cebeleo, Sr.'s interest over the subject
land, the complaint impleaded his wife, Maude, when pursuant to Article 972[35] of the Civil Code,
the proper representatives to his interest should have been his children, Cebeleo, Jr. and Neobel.
Verily, Santiago's omission of the aforesaid heirs renders his complaint for partition defective.

Santiago's contention that he had already bought the interests of the majority of the heirs and,
thus, they should no longer be regarded as indispensable parties deserves no merit. As correctly
noted by the CA, in actions for partition, the court cannot properly issue an order to divide the
property, unless it first makes a determination as to the existence of co-ownership. The court must
initially settle the issue of ownership, which is the first stage in an action for partition.[36] Indubitably,
therefore, until and unless this issue of co-ownership is definitely and finally resolved, it would be
premature to effect a partition of the disputed properties.[37]

In this case, while it is conceded that Santiago bought the interests of majority of the heirs of
Conrado, Sr. as evidenced by the subject document, as a vendee, he merely steps into the shoes
of the vendors-heirs. Since his interest over the subject land is merely derived from that of the
vendors-heirs, the latter should first be determined as co-owners thereof, thus necessitating the
joinder of all those who have vested interests in such land, i.e., the aforesaid heirs of Conrado,
Sr., in Santiago's complaint.

In fine, the absence of the aforementioned indispensable parties in the instant complaint for judicial
partition renders all subsequent actions of the RTC null and void for want of authority to act, not
only as to the absent parties, but even as to those present.[38] Therefore, the CA correctly set aside
the November 29, 2002 Decision and the April 4, 2003 Order of the RTC.

However, the CA erred in ordering the dismissal of the complaint on account of Santiago's failure
to implead all the indispensable parties in his complaint. In Heirs of Mesina v. Heirs of Fian,
Sr.,[39] the Court definitively explained that in instances of non-joinder of indispensable parties, the
proper remedy is to implead them and not to dismiss the case, to wit:

The non-joinder of indispensable parties is not a ground for the dismissal of an action. At
any stage of a judicial proceeding and/or at such times as are just, parties may be added on the
motion of a party or on the initiative of the tribunal concerned. If the plaintiff refuses to implead an
indispensable party despite the order of the court, that court may dismiss the complaint for the
plaintiff's failure to comply with the order. The remedy is to implead the non-party claimed to
be indispensable. x x x[40](Underscoring supplied; emphases in the original)

In view of the foregoing, the correct course of action in the instant case is to order its remand to
the RTC for the inclusion of those indispensable parties who were not impleaded and for the
disposition of the case on the merits.[41]

WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the Decision dated March 26,
2009 and the Resolution dated April 6, 2011 of the Court of Appeals in CA-G.R. CV. No. 80167,
setting aside the Decision dated November 29, 2002 and the Order dated April 4, 2003 of the
67
 d. Lot Nos. 7, 14 and 20, Block III (New Plan), Block V (Old Plan).
21. Enrique de Santiago v. Vilar - Parties to Civil Action e. Lot Nos. 13 and 20, Block IV (New Plan), Block VI (Old Plan).
f. Lot Nos. 1, 2, 3 and 10, Block V (New Plan), Block VII (Old Plan).
g. Lot Nos. 1, 5, 8, 15, 26 and 27, Block VI (New Plan), Block VIII (Old Plan).
h. Lot Nos. 7 and 12, Block VII (New Plan), Block II (Old Plan),
Before this Court is a consolidated Petition for Review on Certiorari1 under Rule 45 of the Rules
i. Lot Nos. 1, 4 and 6, Block VIII (New Plan), Block X (Old Plan).
of Court, assailing the Decision2 dated February 10, 2014 and Amended Decision3 dated June 17,
j. Lot 5, Block X (New Plan), Block XIII (Old Plan).
2016 of the Court of Appeals (CA) in CA-G.R. SP No. 117439, filed by petitioner Rosario Enriquez
k. Lot 6, Block XI (New Plan), Block XII (Old Plan).
Vda. de Santiago (Rosario) and petitioner Government Service Insurance System (GSIS).
l. Lots 2, 5, 12 and 15, Block I.
m. Lots 6, 9 and 11, Block 2.
Facts of the Case n. Lots 1, 5, 6, 7, 16 and 23, Block 3.
o. Lot 6, Block 4.
Spouses Jose C. Zulueta and Soledad Ramos (Spouses Zulueta), registered owners of several p. Lots 5, 12, 13 and 24, Block 5.
parcels of land covered by Transfer Certificate of Title (TCT) Nos. 26105, 37177 and 50356 q. Lots 10 and 16, Block 6.
(mother titles), obtained various loans secured by the mother titles from the GSIS. The amount of r. Lots 6 and 15, Block 7.
loans, with the accumulated value of P3,117,000.00 were obtained from September 1956 to s. Lots 13, 24, 28 and 29, Block 8.
October 1957.4 t. Lots 1, 11, 17 and 22, Block 9.
u. Lots 1, 2, 3 and 4, Block 10.
From the records, the lot covered by Transfer Certificate of Title (TCT) No. 26105 was divided into v. Lots 1,2,3 and 5 (New), Block 11.
199 lots. Under the first mortgage contract, 78 of these lots were excluded from the mortgage. 5

When Spouses Zulueta defaulted in their payment, GSIS extra-judicially foreclosed the mortgages 2. Ordering [GSIS] to pay [Rosario], if the seventy- eight (78) excluded lots could not be
in August 1974 wherein the latter emerged as the highest bidder. A certificate of sale was then reconveyed; the fair market value of each of said lots.
issued. GSIS, however, consolidated its title on all of the three mother titles, including the 78 lots
which were expressly excluded from the mortgage contract. 6 3. Ordering the Registry of Deeds of Pasig City, to cancel the land titles covering the excluded lots
in the name of [GSIS] or any of its successors-in-interest including all derivative titles therefrom
Later, GSIS sold the foreclosed properties to Yorkstown Development Corporation (YDC). The and to issue new titles in [Rosario's] name.
same, however, was disapproved by the Office of the President. Accordingly, the TCTs issued in
favor of YDC were canceled.7 4. Ordering the Register of Deeds of Pasig City, to cancel the Notices of Lis Pendens inscribed in
TCT No. PT-80342 under Entry No. PT-12267/T-23554; TCT No. 81812 under Entry No. PT-
When GSIS reacquired the properties sold to YDC, it began to dispose the foreclosed lots, 12267/T-23554; and TCT No. PT-84913 under Entry No. PT-12267/T-23554.
including those not covered by the foreclosure sale.8
5. Costs of suit.
Thereafter, Spouses Zulueta were succeeded by Antonio Zulueta (Antonio), who transferred all
his rights and interests in the excluded lots to Eduardo Santiago (Eduardo). Claiming his rights Counterclaims filed by [GSIS], intervenors Urbano and intervenors Gonzales are DISMISSED.
and interests over the excluded lots, Eduardo, through his counsel, sent a letter to GSIS for the
return of the same.9 SO ORDERED.12
On appeal, the CA affirmed the trial court's rulings in a Decision dated February 22, 2002.13 The
In May 1990, Antonio, as represented by Eduardo, filed an Action for Reconveyance of the same was affirmed by this Court in a Decision14 dated October 28, 2003 in G.R. No. 155206.
excluded lots against the GSIS. Subsequently, Antonio was substituted by Eduardo. Upon Accordingly, an entry of judgment was issued.15 When the decision became final and executory,
Eduardo's demise, however, he was substituted by his widow, herein petitioner Rosario. 10 Rosario filed a motion for execution.16

In a Decision11 dated December 17, 1997, the Regional Trial Court (RTC) of Pasig City, Branch
71, ordered GSIS to reconvey to Rosario the excluded lots or to pay the market value of said lots
in case reconveyance is not possible. The Registry of Deeds of Pasig City was likewise ordered
to cancel the titles covering the excluded lots issued in the name of GSIS. The dispositive portion
thereof reads:
WHEREFORE, judgment is hereby rendered in favor of [Rosario] and against [GSIS]:
1. Ordering defendant to reconvey to [Rosario] the seventy-eight (78) lots released and excluded
from the foreclosure sale including the additional exclusion from the public sale, namely:
a. Lot Nos. 1, 6, 7, 8, 9, 10 and 13, Block I (Old Plan).
b. Lot Nos. 1, 3, 4, 5, 7, 8, 10, Block II (Old Plan).
c. Lot Nos. 3, 10, 12 and 13, Block I (New Plan), Block III (Old Plan).
In an Order17 dated April 27, 2004, the RTC granted the motion for execution. The RTC fixed the
current fair market value of the lots at P35,000 per square meter or a total of P1,166,165,000.
Thereafter, in an Order18 dated May 13, 2004, the RTC denied the motion filed by the GSIS for
the quashal of the writ of execution.
On May 21, 2004, GS1S filed a Petition for Certiorari and Prohibition before the CA, docketed as
CA-G.R. SP No. 84079, ascribing grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the RTC in denying GSIS' motion to quash. 19
Meanwhile, to effect the implementation of the writ of execution, Rosario, through counsel, filed a
Motion to Direct the Sheriff to Proceed with the Garnished Funds of GSIS with DBP and PNB with
Motion for Immediate Execution of Undersigned Counsel's Attorney's Lien Against such Garnished
Funds.20
In an Order21 dated September 12, 2006, the RTC ordered the release of said deposits and the

68
enforcement of the writ of execution earlier issued, up to extent allowed per the CA decision. The 1. To issue an alias writ of execution on the partial execution of Php399,828,000.00;
90% of the proceeds of the execution was ordered to be turned over immediately to Rosario.
2. Upon satisfaction/payment by [GSIS] of the aforesaid amount the Branch Sheriff of this
The CA, however, in CA-G.R. SP No. 84079, rendered a Decision22 dated August 3, 2006, wherein Court is directed to immediately deposit 35% of the said amount to the account of
it partially granted the petition of GSIS. The CA modified the ruling of the RTC in that the extent of [Rosario];
the value of the excluded lots shall be P399,828,000 and that the execution of the same may
immediately proceed while the writ of preliminary injunction against the execution of the judgment
award is made permanent.23 3. The other 35% shall remain in custodia legis subject to the final disposition of Atty.
Suing's claim for attorney's fees now pending before the [CA] or any settlement he may
In the meantime, while resolving several motions filed before the RTC following the CA decision enter into with [Rosario]; provided, however, that the sum of Php23,989,680.00 shall be
dated August 3, 2006, the RTC, in an Order24 dated November 20, 2006 limited the attorney's fees immediately satisfied and released to Atty. Suing to be taken from said 35% attorney's
of Rosario's counsels to the 10% of the P399,828,000 based on quantum meruit, among others. fees;
Likewise, in the same order, the RTC denied GSIS' motion for reconsideration on the RTC s
September 12, 2006 Order.25 4. The award of attorney's fees to Atty. Benjamin Santos (Php13,993,980.00), Atty.
Sherwin S. Gatdula (Php1,599,312.00) and Atty. Wellington B. Lachica
Atty. Jose A. Suing (Atty. Suing), counsel in the reconveyance case for Rosario, questioned the (Php399,828.00) shall be satisfied immediately from the remaining 30% of the partial
said Order dated November 20, 2006 by the RTC as it allegedly reduced his attorney's fee to 6% executed amount; and
of the judgment award instead of 35% as stated in the Memorandum of Understanding between
him and Rosario.26 The same, however, was already resolved by this Court in a Decision27 dated 5. The balance on the remaining 30% shall also remain in custodia legis subject to any
October 21, 2015 in G.R. Nos. 194814 (Rosario Enriquez Vda. De Santiago v. Atty. Jose A. Suing) settlement or compromise the claimants may enter with [Rosario]."
& 194825 (Jaime C. Vistar v. Atty. Jose A. Suing) wherein the Court affirmed the RTC's ruling that
attorney's fees in the amount of 6% of the partially executed judgment is considered fair partial
compensation for his legal services. Let an alias writ immediately issue.

GSIS, for its part, filed a Petition for Certiorari and Prohibition before this Court to annul the Orders SO ORDERED.33
dated September 12, 2006 and November 20, 2006 of the RTC. Also, GSIS filed a Petition for Hence, Vilar filed a Petition for Certiorari before the CA, docketed as CA-G.R. SP No. 117439,
Review on Certiorari under Rule 45 to reverse and set aside the CA Decision dated August 3, ascribing grave abuse of discretion on the part of the RTC in merely noting and not granting Vilar's
2006. These two petitions were subsequently consolidated upon motion of GSIS.28 The same, motion.34 In a Decision35 dated February 10, 2014, the CA granted Vilar's petition. The dispositive
however, were later dismissed by this Court in a Decision29 dated December 18, 2009 in G.R. portion thereof reads:
Nos. 175393 (Government Service Insurance System v. Regional Trial Court of Pasig City, Branch
71) and 177731 (Government Service Insurance System v. Laviña). WHEREFORE, the instant Petition is GRANTED. The Order dated December 8, 2010 of the
[RTC], Branch 71, Pasig City is hereby MODIFIED as follows:
In the interim, Rosario and a certain Jaime Vistar (Jaime) filed a Joint Manifestation for Judicial
Confirmation and Approval of an Agreement dated January 2, 2009 before the RTC. In said 1. The Verified Omnibus Motion (for Substitution of Party Plaintiff with Authority to
Agreement, it was alleged that Rosario assigned to Jaime her share, right, participation and Implement Writ of Execution Until Full Satisfaction of the Final Judgment of the Court)
interest in the reconveyance case equivalent to 50% of whatever Rosario is entitled to receive filed by [Vilar] through counsel is GRANTED;
from the same. Similarly, Eastern Petroleum Corporation (EPC) and Albert Espiritu (Albert) filed a
Motion to Intervene, which was supported by the copies of Deed of Assignment entered into by
Rosario and EPC, as well as copies of Memorandum of Agreement and Special Power of Attorney. 2. Accordingly, [Vilar] is 1MPLEADED as party-plaintiff in substitution of [Rosario];
In said Deed of Assignment, it was averred that Rosario transferred to EPC 40% of the proceeds
of the judgment award in the reconveyance case while in said Memorandum of Agreement, EPC 3. And upon satisfaction/payment by [GSIS] of the amount of P399,828,000.00, the Branch
ceded to Albert half of the amount ceded by Rosario. 30 Sheriff of the trial court is directed to give 90% of the 35% of the share of [Rosario] to
[Vilar]. The remaining 10% of said 35% shall be deposited to the account of [Rosario].
On the other hand, herein respondent Antonio Vilar (Vilar) filed a Verified Omnibus Motion (for
Substitution of Party-Plaintiff With Authority to Implement Writ of Execution Until Full Satisfaction The Order dated December 8, 2010 is AFFIRMED in all other respects.
of the Final Judgment of the Court) before the RTC. In his motion, Vilar alleged that after Antonio
transferred his rights and interests to Eduardo, the latter assigned to Vilar 90% of his interest in SO ORDERED.36
the judgment proceeds of the reconveyance case. Further, Vilar averred that he and Eduardo On June 17, 2016, the CA issued its assailed Amended Decision, 37 which in essence, denied the
agreed that the Deed of Assignment shall still take effect despite the fact of substitution. 31 motion for intervention filed by Atty. Gilberto Alfafara (Atty. Alfafara), former counsel of Vilar and
denied GSIS1 partial motion for reconsideration and Rosario's motion to intervene and to admit
In resolving Vilar's motion, the RTC merely noted the same without action in its Order32 dated motion for reconsideration. The fallo thereof reads:
December 8, 2010. The dispositive portion thereof reads:
WHEREFORE, the Court resolves as follows:
WHEREFORE, premises considered, the dispositive portion of the Order dated 17 September
2010 is hereby AMENDED to read as follows:
1. [Atty. Alfafara's] Motion for Intervention to Protect Attorney's Rights is DENIED.
"x x x x
69
 2. [Vilar's] Manifestation and Motion dated October 27, 2014 is likewise DENIED.
In the Matter of the Heirship (Intestate Estates) of the Late Hermogenes Rodriguez, et al. v.
3. [Vilar's] Manifestation dated March 14, 2014 is NOTED with APPROVAL only insofar Robles,41the Court held that:
as it seeks to correct the statement of Facts and Antecedent Proceedings as found on
Page 7, paragraph 2 of the Court's Decision dated February 10, 2014. Accordingly, page The joinder of indispensable parties is mandatory. The presence of indispensable parties is
7, paragraph 2 of the Decision dated February 10, 2014 is MODIFIED as follows: necessary to vest the court with jurisdiction, which is the authority to hear and determine a cause,
the right to act in a case. Thus, without the presence of indispensable parties to a suit or
proceeding, judgment of a court cannot attain real finality.42
"Meanwhile, it appears that Vilar executed on February 15, 2011 a Deed of Confirmation Verily, Rosario is an indispensable party in the petition before the CA as she is the widow of the
of Assignment of Rights whereby he assigned in favor of Harold Cuevas (Harold) 112% original party-plaintiff Eduardo. The determination of the propriety of the action of the trial court in
participation in the reconveyance case. By virtue of said Deed of Confirmation of merely noting and not granting his motion would necessarily affect her interest in the subject matter
Assignment of Rights, Harold filed a complaint for breach of contract, specific of litigation as the party-plaintiff.
performance, injunction and damages ("breach of contract case") against Rosario and
GSIS seeking that the 90% share of Vilar and his 112% share therein be recognized Accordingly, the Court differs with the CA in ruling that the petition for certiorari filed before it
and paid." merely delves into the issue of grave abuse of discretion committed by the lower court. Guilty of
repetition, the final determination of the case would pry into the right of Rosario as party-plaintiff
4. GSIS's Motion for Partial Reconsideration (of the Honorable Court's Decision dated before the lower court who is entitled to the proceeds of the judgment award. As it is, the CA did
February 10, 2014) is DENIED. not actually rule on the issue of grave abuse of discretion alone as its corollary ruling inquired into
the right of Rosario. In ruling for Vilar's substitution, the right of Rosario as to the proceeds of the
judgment award was thwarted as the CA effectively ordered that the proceeds pertaining to
5. [Rosario's] Ex Abudanti Motion to Intervene and to Admit the Attached Motion for Rosario be awarded instead to Vilar.
Reconsideration (Re: Decision dated 10 February 2014) are DENIED.
Likewise, the Court finds merit in Rosario's contention that her failure to participate in the
6. [Rosario's] Motion to Expunge [Vilar's] Comment/Opposition with Motion to Admit Reply proceedings before the CA constitutes a denial of her constitutional right to due process. 43
(To: [Vilar's] Comment/Opposition dated 16 June 2014) are EXPUNGEDfrom the
records. Hence, failure to implead Rosario as an indispensable party rendered all the proceedings before
the CA null and void for want of authority to act. 44
SO ORDERED.38
Moreover, even the basis for the substitution of Vilar as pronounced by the CA was unfounded. In
Hence, this petition.
ruling so, the CA merely relied on the purported Deeds of Assignment of Rights executed between
Eduardo and Vilar in considering that the latter is a transferee pendente lite, who can rightfully and
legally substitute Rosario as party-plaintiff in the implementation of a writ of execution. 45
Issue
Yet, it is significant to note that the Court already brushed aside said Deeds of Assignment for
In sum, the issue in this case is whether or not the CA erred in impleading Vilar as party-plaintiff
being belatedly filed in its Decision dated October 21, 2015 in G.R. Nos. 194814 and 194825. The
in substitution of Rosario.
Court did not discuss any further the validity and due execution of said Deeds as the same were
brought to the attention of the trial court more than 20 years after the same were allegedly
executed.46
Ruling of the Court
Considering the foregoing, the Court need not belabor on the other issues raised by petitioners.
Both Rosario and GSIS claim that Rosario is an indispensable party in the petition because the
same seeks to assail the order of the RTC which involves its action on Vilar's motion to be
As a final note, it must be considered that this case was extant since 1990. The decision of the
substituted in Rosario's stead as regards the implementation of the writ of execution.
trial court in 1997 which ruled that Spouses Zulueta, who were substituted by Rosario as party-
plaintiff are entitled to the excluded lots or its amount equivalent, has become final and executory
The Court finds the same to be with merit.
when this Court affirmed the same in 2003 in G.R. No. 155206. Subsequently, an Entry of
Judgment was issued by this Court in 2004. However, despite the issuance of a writ of execution
The case stemmed from the action for reconveyance filed by Eduardo, husband of Rosario. To
in 2004, the case had several pending incidents which prohibit Rosario, to recover what is rightfully
recall, Eduardo was the successor-in-interest of Antonio, who is actually the successor-in-interest
hers. To warrant the unjustified delay of these proceedings would tantamount to denial of the fruits
of Spouses Zulueta. Spouses Zulueta are the original owners of the subject parcels of land. Upon
of the judgment in her favor.
the death of the party-plaintiff Eduardo, Rosario was substituted in his stead. The case was
subsequently decided on December 17, 1997 and affirmed by this Court in October 28, 2003. An
WHEREFORE, the petition is GRANTED. The Decision dated February 10, 2014 and Amended
Entry of Judgment was issued in 2004. In all these incidents, Rosario was considered as the party-
Decision dated June 17, 2016 in CA-G.R. S.P. No. 117439 are REVERSED and SET ASIDE in
plaintiff.
that the Verified Omnibus Motion (for Substitution of Party-Plaintiff With Authority to Implement
Writ of Execution Until Full Satisfaction of the Final Judgment of the Court) filed by Antonio Vilar
By definition, an indispensable party is a party-in-interest without whom no final determination can
is DENIED. Accordingly, the impleading of Antonio Vilar as party-plaintiff in substitution of Rosario
be had of an action, and who shall be joined either as plaintiffs or defendants.39 It is a party whose
Enriquez Vda. De Santiago is NULLIFIED. The Order dated December 8, 2010 is
interest will be affected by the court's action in the litigation.40
hereby REINSTATED in toto.
70
SO ORDERED.

71
 22. Pacific Consultants v. Schonfeld – Jurisdiction v. Venue contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its
obligations, this Letter of Employment will prevail.

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the 1. Project Country: The Philippines with possible short-term assignments in other countries.
Decision1of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the
Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029319-
2. Duty Station: Manila, the Philippines.
01, which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-
00 dismissing the complaint of respondent Klaus K. Schonfeld.
3. Family Status: Married.
The antecedent facts are as follows:
4. Position: Sector Manager, Water and Sanitation.
Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia,
Canada. He had been a consultant in the field of environmental engineering and water supply and 5. Commencement: 1st October 1997.
sanitation. Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in
accordance with the laws of the Philippines. The primary purpose of PPI was to engage in the
business of providing specialty and technical services both in and out of the Philippines. 2 It is a 6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary
(US$2,100.00 per month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI to
subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter
Henrichsen, who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted bank accounts to be nominated by you.
from Japan to Manila and vice versa, as well as in other countries where PCIJ had business.
A performance related component corresponding to 17.6% of the total annual remuneration,
In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the subject to satisfactory performance against agreed tasks and targets, paid offshore.
Philippines. In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector
Manager of PPI in its Water and Sanitation Department. However, PCIJ assigned him as PPI 7. Accommodation: The company will provide partly furnished accommodation to a rent including
sector manager in the Philippines. His salary was to be paid partly by PPI and PCIJ. association fees, taxes and VAT not exceeding the Pesos equivalent of US$2,900.00 per month.

On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada, 8. Transportation: Included for in the remuneration.
requesting him to accept the same and affix his conformity thereto. Respondent made some
revisions in the letter of employment and signed the contract.3 He then sent a copy to Henrichsen.
The letter of employment reads: 9. Leave Travels: You are entitled to two leave travels per year.

Mr. Klaus K. Schonfeld 10. Shipment of Personal

II-365 Ginger Drive
New Westminster, B.C. Effects: The maximum allowance is US$4,000.00.
Canada V3L 5L5
Tokyo 7
11. Mobilization

January 1998
Travel: Mobilization travel will be from New Westminster, B.C., Canada.

Dear Mr. Schonfeld,

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to
us.
Letter of Employment
Yours sincerely,
This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement under which you will be engaged by our Company on the terms and conditions defined
hereunder. In case of any discrepancies or contradictions between this Letter of Employment and Pacific Consultants International
the General Conditions of Employment, this Letter of Employment will prevail. Jens Peter Henrichsen

You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines, Above terms and conditions accepted
Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a separate contract,
which will define that part of the present terms and conditions for which Pacicon is responsible. In Date: 2 March 1998
case of any discrepancies or contradictions between the present Letter of Employment and the

72
(Sgd.) APPROVED: BIENVENIDO S. LAGUESMA
Klaus Schonfeld
By: MAXIMO B. ANITO
as annotated and initialed4 REGIONAL DIRECTOR

Section 21 of the General Conditions of Employment appended to the letter of employment reads: (Emphasis supplied)6

21 Arbitration
Any question of interpretation, understanding or fulfillment of the conditions of employment, as
well as any question arising between the Employee and the Company which is in consequence of
or connected with his employment with the Company and which can not be settled amicably, is to
be finally settled, binding to both parties through written submissions, by the Court of Arbitration
in London.5
Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was
accorded the status of a resident alien.
As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor
Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the Department
of Labor and Employment (DOLE). It appended respondent's contract of employment to the
application.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Respondent received his compensation from PPI for the following periods: February to June 1998,
November to December 1998, and January to August 1999. He was also reimbursed by PPI for
the expenses he incurred in connection with his work as sector manager. He reported for work in
Manila except for occasional assignments abroad, and received instructions from Henrichsen. 7
On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment
had been terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been
successful in the water and sanitation sector in the Philippines. 8However, on July 24, 1999,
Henrichsen, by electronic mail,9 requested respondent to stay put in his job after August 5, 1999,
until such time that he would be able to report on certain projects and discuss all the opportunities
he had developed.10 Respondent continued his work with PPI until the end of business hours on
October 1, 1999.
Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from
Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of his
claims (US$5,635.99), but refused to pay the rest.

On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It
On December 5, 2000, respondent filed a Complaint11for Illegal Dismissal against petitioners PPI
reads:
and Henrichsen with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.

Republic of the Philippines

Department
National Capital Region
ALIEN EMPLOYMENT PERMIT
In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the
of Labor & Employment
DOLE of its decision to close one of its departments, which resulted in his dismissal; and they
failed to notify him that his employment was terminated after August 4, 1999. Respondent also
claimed for separation pay and other unpaid benefits. He alleged that the company acted in bad
faith and disregarded his rights. He prayed for the following reliefs:

ISSUED TO: SCHONFELD, KLAUS KURT 1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to his
former position without loss of seniority and other privileges and benefits, and to pay his full
backwages from the time compensation was with held (sic) from him up to the time of his actual
DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian reinstatement. In the alternative, if reinstatement is no longer feasible, respondents must pay the
complainant full backwages, and separation pay equivalent to one month pay for every year of
POSITION: VP - WATER & SANITATION service, or in the amount of US$16,400.00 as separation pay;

EMPLOYER: PACICON PHILIPPINES, INC. 2. Judgment be rendered ordering the respondents to pay the outstanding monetary obligation to
complainant in the amount of US$10,131.76 representing the balance of unpaid salaries, leave
pay, cost of his air travel and shipment of goods from Manila to Canada; andcralawlibrary
ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City

3. Judgment be rendered ordering the respondent company to pay the complainant damages in
PERMIT the amount of no less than US $10,000.00 and to pay 10% of the total monetary award as
attorney's fees, and costs.
ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:
Other reliefs just and equitable under the premises are, likewise, prayed
VALID UNTIL: January 7, 2000 (Sgd.) for.12 ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

73
Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter 6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by you.
had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred that
respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He was
7. Accommodation: The company will provide partly furnished accommodation to a rent including
employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since
association fees, taxes and VAT not exceeding the Pesos equivalent of US$2300.00 per month.
respondent's cause of action was based on his letter of employment executed in Tokyo, Japan
dated January 7, 1998, under the principle of lex loci contractus, the complaint should have been
filed in Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing 8. Transportation: Included for in the remuneration.
his complaint against PPI before the NLRC in the Philippines. Moreover, under Section 12 of the
General Conditions of Employment appended to the letter of employment dated January 7, 1998,
complainant and PCIJ had agreed that any employment-related dispute should be brought before 9. Shipment of Personal The maximum allowance is US$2500.00 in Effects: connection with initial
shipment of personal effects from Canada.
the London Court of Arbitration. Since even the Supreme Court had already ruled that such an
agreement on venue is valid, Philippine courts have no jurisdiction.13
10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.
Respondent opposed the Motion, contending that he was employed by PPI to work in the
Philippines under contract separate from his January 7, 1998 contract of employment with PCIJ. This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to
He insisted that his employer was PPI, a Philippine-registered corporation; it is inconsequential us.
that PPI is a wholly-owned subsidiary of PCIJ because the two corporations have separate and
distinct personalities; and he received orders and instructions from Henrichsen who was the
president of PPI. He further insisted that the principles of forum non conveniens and lex loci Yours sincerely,
contractus do not apply, and that although he is a Canadian citizen, Philippine Labor Laws apply
in this case. Pacicon Philippines, Inc.
Jens Peter Henrichsen
Respondent adduced in evidence the following contract of employment dated January 9, 1998 President14
which he had entered into with Henrichsen:
According to respondent, the material allegations of the complaint, not petitioners' defenses,
Mr. Klaus K. Schonfeld determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the
General Conditions of Employment does not provide for an exclusive venue where the complaint
against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that
II-365 Ginger Drive PPI had adopted two inconsistent positions: it was first alleged that he should have filed his
New Westminster, B.C. complaint in Tokyo, Japan; and it later insisted that the complaint should have been filed in the
Canada V3L 5L5 London Court of Arbitration.15

Manila 9 January, 1998 In their reply, petitioners claimed that respondent's employer was PCIJ, which had exercised
supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of
Dear Mr. Schonfeld, Henrichsen under the letterhead of PCIJ in Japan.16 The letter of employment dated January 9,
1998 which respondent relies upon did not bear his (respondent's) signature nor that of
Henrichsen.
Letter of Employment
On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners' Motion to Dismiss.
This Letter of Employment with the attached General Conditions of Employment constitutes the The dispositive portion reads:
agreement, under which you will be engaged by Pacicon Philippines, Inc. on the terms and
conditions defined hereunder.
WHEREFORE, finding merit in respondents' Motion to Dismiss, the same is hereby granted. The
instant complaint filed by the complainant is dismissed for lack of merit.
1. Project Country: The Philippines with possible assignments in other countries.
SO ORDERED.17
2. Duty Station: Manila, the Philippines.
The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between
3. Family Status: Married. respondent and PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld
was required to work under the General Conditions of Employment. PCIJ remained respondent's
employer despite his having been sent to the Philippines. Since the parties had agreed that any
4. Position: Sector Manager - Water and Sanitation Sector.
differences regarding employer-employee relationship should be submitted to the jurisdiction of
the court of arbitration in London, this agreement is controlling.
5. Commencement: 1 January, 1998.

74
On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter's
decision in toto.18
Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the
following arguments:
I WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT AFFIRMED THE LABOR ARBITER'S DECISION CONSIDERING THAT:
A. PETITIONER'S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF
JAPAN BUT RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS
JURISDICTION OVER THE INSTANT CASE; AND
B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH
OF THE NLRC AND NOT THE COURT OF ARBITRATION IN LONDON.
II
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT AFFIRMED THE DISMISSAL OF THE COMPLAINT CONSIDERING THAT
PETITIONER'S TERMINATION FROM EMPLOYMENT IS ILLEGAL:
A. THE CLOSURE OF RESPONDENT COMPANY'S WATER AND SANITATION SECTOR WAS
NOT BONA FIDE.
B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANY'S WATER
AND SANITATION SECTOR WAS JUSTIFIABLE, PETITIONER'S DISMISSAL WAS
INEFFECTUAL AS THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) AND
PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED CLOSURE.19
Respondent averred that the absence or existence of a written contract of employment is not
decisive of whether he is an employee of PPI. He maintained that PPI, through its president
Henrichsen, directed his work/duties as Sector Manager of PPI; proof of this was his letter-
proposal to the Development Bank of the Philippines for PPI to provide consultancy services for
the Construction Supervision of the Water Supply and Sanitation component of the World Bank-
Assisted LGU Urban Water and Sanitation Project.20 He emphasized that as gleaned from Alien
Employment Permit (AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999, he
is an employee of PPI. It was PPI president Henrichsen who terminated his employment; PPI also
paid his salary and reimbursed his expenses related to transactions abroad. That PPI is a wholly-
owned subsidiary of PCIJ is of no moment because the two corporations have separate and
distinct personalities.
The CA found the petition meritorious. Applying the four-fold test21 of determining an employer-
employee relationship, the CA declared that respondent was an employee of PPI. On the issue of
venue, the appellate court declared that, even under the January 7, 1998 contract of employment,
the parties were not precluded from bringing a case related thereto in other venues. While there
was, indeed, an agreement that issues between the parties were to be resolved in the London
Court of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint
cannot be filed in any other forum other than in the Philippines.
On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of
which reads:
REVERSED and SET ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for
disposition of the case on the merits.
SO ORDERED.22
A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the
appellate court denied for lack of merit.23
In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:
I
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT
RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE
UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY
A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND
WAS MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN
MANILA.
II
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO
HAS JURISDICTION OVER RESPONDENT'S CLAIM DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN
CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD AGREED
THAT ANY DISPUTE BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF
ARBITRATION IN LONDON."24
Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners
aver that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA.
They maintain that it is not within the province of the appellate court in a petition for certiorari to
review the facts and evidence on record since there was no conflict in the factual findings and
conclusions of the lower tribunals. Petitioners assert that such findings and conclusions, having
been made by agencies with expertise on the subject matter, should be deemed binding and
conclusive. They contend that it was the PCIJ which employed respondent as an employee; it
merely seconded him to petitioner PPI in the Philippines, and assigned him to work in Manila as
Sector Manager. Petitioner PPI, being a wholly-owned subsidiary of PCIJ, was never the employer
of respondent.
Petitioners assert that the January 9, 1998 letter of employment which respondent presented to
prove his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the
purported parties. They insist that PCIJ paid respondent's salaries and only coursed the same
through petitioner PPI. PPI, being its subsidiary, had supervision and control over respondent's
work, and had the responsibilities of monitoring the "daily administration" of respondent.
75
Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda
to prove that he was an employee of petitioner PPI because these documents are of doubtful
authenticity.
Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of
PPI, it was he who signed the termination letter of respondent upon instructions of PCIJ. This is
buttressed by the fact that PCIJ's letterhead was used to inform him that his employment was
terminated. Petitioners further assert that all work instructions came from PCIJ and that petitioner
PPI only served as a "conduit." Respondent's Alien Employment Permit stating that petitioner PPI
was his employer is but a necessary consequence of his being "seconded" thereto. It is not
sufficient proof that petitioner PPI is respondent's employer. The entry was only made to comply
with the DOLE requirements.
There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has
no jurisdiction over respondent's complaint.
Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim
that the principlesof forum non conveniens and lex loci contractus are applicable. They also point
out that the principal office, officers and staff of PCIJ are stationed in Tokyo, Japan; and the
contract of employment of respondent was executed in Tokyo, Japan.
Moreover, under Section 21 of the General Conditions for Employment incorporated in
respondent's January 7, 1998 letter of employment, the dispute between respondent and PCIJ
should be settled by the court of arbitration of London. Petitioners claim that the words used therein
are sufficient to show the exclusive and restrictive nature of the stipulation on venue.
Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers,
while the Labor Code of the Philippines applies only to Filipino employers and Philippine-based
employers and their employees, not to PCIJ. In fine, the jurisdictions of the NLRC and Labor
Arbiter do not extend to foreign workers who executed employment agreements with foreign
employers abroad, although "seconded" to the Philippines.25
In his Comment,26 respondent maintains that petitioners raised factual issues in their petition which
are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had
been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary evidence
which both the Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss his
complaint on the basis of the letter of employment and Section 21 of the General Conditions of
Employment. In contrast, the CA took into account the evidence on record and applied case law
correctly.
The petition is denied for lack of merit.
It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from reviewing
the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No.
7902, the CA is empowered to pass upon the evidence, if and when necessary, to resolve factual
issues.27 If it appears that the Labor Arbiter and the NLRC misappreciated the evidence to such
an extent as to compel a contrary conclusion if such evidence had been properly appreciated, the
factual findings of such tribunals cannot be given great respect and finality. 28
Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent
appended to his pleadings showing that he was an employee of petitioner PPI; they merely
focused on the January 7, 1998 letter of employment and Section 21 of the General Conditions of
Employment.
Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said
application, PPI averred that respondent is its employee. To show that this was the case, PPI
appended a copy of respondent's employment contract. The DOLE then granted the application
of PPI and issued the permit.
It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the
requirements for the issuance of an employment permit is the employment contract. Section 5,
Rule XIV (Employment of Aliens) of the Omnibus Rules provides:
SECTION 1. Coverage. - This rule shall apply to all aliens employed or seeking employment in
the Philippines and the present or prospective employers.
SECTION 2. Submission of list. - All employers employing foreign nationals, whether resident or
non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship,
foreign and local address, nature of employment and status of stay in the Philippines.
SECTION 3. Registration of resident aliens. - All employed resident aliens shall register with the
Bureau under such guidelines as may be issued by it.
SECTION 4. Employment permit required for entry. - No alien seeking employment, whether as a
resident or non-resident, may enter the Philippines without first securing an employment permit
from the Ministry. If an alien enters the country under a non-working visa and wishes to be
employed thereafter, he may only be allowed to be employed upon presentation of a duly approved
employment permit.
SECTION 5. Requirements for employment permit applicants. - The application for an employment
permit shall be accompanied by the following:
(a) Curriculum vitae duly signed by the applicant indicating his educational background, his work
experience and other data showing that he possesses technical skills in his trade or profession.
(b) Contract of employment between the employer and the principal which shall embody the
following, among others:
1. That the non-resident alien worker shall comply with all applicable laws and rules and
regulations of the Philippines;
2. That the non-resident alien worker and the employer shall bind themselves to train at least two
(2) Filipino understudies for a period to be determined by the Minister; andcralawlibrary
3. That he shall not engage in any gainful employment other than that for which he was issued a
permit.
(c) A designation by the employer of at least two (2) understudies for every alien worker. Such
understudies must be the most ranking regular employees in the section or department for which
the expatriates are being hired to insure the actual transfer of technology.
76
Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the to restrict venue, there must be accompanying language clearly and categorically expressing their
following: purpose and design that actions between them be litigated only at the place named by them. 32

(a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;
(b) Report of the Bureau Director as to the availability or non-availability of any person in the
Philippines who is competent and willing to do the job for which the services of the applicant are
desired;
(c) His assessment as to whether or not the employment of the applicant will redound to the
national interest;
(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;
(e) The recommendation of the Board of Investments or other appropriate government agencies
if the applicant will be employed in preferred areas of investments or in accordance with the
imperative of economic development.
Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise,
petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are thus
estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of respondent all
along.
In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other
court save '," "particularly," "nowhere else but/except '," or words of equal import were stated in
the contract.33 It cannot be said that the court of arbitration in London is an exclusive venue to
bring forth any complaint arising out of the employment contract.
Petitioners contend that respondent should have filed his Complaint in his place of permanent
residence, or where the PCIJ holds its principal office, at the place where the contract of
employment was signed, in London as stated in their contract. By enumerating possible venues
where respondent could have filed his complaint, however, petitioners themselves admitted that
the provision on venue in the employment contract is indeed merely permissive.
Petitioners' insistence on the application of the principle of forum non conveniens must be rejected.
The bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the
application of the principle for the following reasons:
First. The Labor Code of the Philippines does not include forum non conveniens as a ground for
the dismissal of the complaint.34
Second. The propriety of dismissing a case based on this principle requires a factual
determination; hence, it is properly considered as defense. 35

We agree with the conclusion of the CA that there was an employer-employee relationship
Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,36 this
between petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled that
Court held that:
whenever the existence of an employment relationship is in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer's power to control the employee's conduct. It is x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided,
the so-called "control test" which constitutes the most important index of the existence of the that the following requisites are met: (1) that the Philippine Court is one to which the parties may
employer-employee relationship that is, whether the employer controls or has reserved the right conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision
to control the employee not only as to the result of the work to be done but also as to the means as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to
and methods by which the same is to be accomplished. Stated otherwise, an employer-employee enforce its decision. x x x
relationship exists where the person for whom the services are performed reserves the right to
control not only the end to be achieved but also the means to be used in reaching such end. 29 We
Admittedly, all the foregoing requisites are present in this case.
quote with approval the following ruling of the CA:

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
[T]here is, indeed, substantial evidence on record which would erase any doubt that the
76563 is AFFIRMED. This case is REMANDED to the Labor Arbiter for disposition of the case on
respondent company is the true employer of petitioner. In the case at bar, the power to control
the merits. Cost against petitioners.
and supervise petitioner's work performance devolved upon the respondent company. Likewise,
the power to terminate the employment relationship was exercised by the President of the
respondent company. It is not the letterhead used by the company in the termination letter which SO ORDERED.
controls, but the person who exercised the power to terminate the employee. It is also
inconsequential if the second letter of employment executed in the Philippines was not signed by
the petitioner. An employer-employee relationship may indeed exist even in the absence of a
written contract, so long as the four elements mentioned in the Mafinco case are all present. 30

The settled rule on stipulations regarding venue, as held by this Court in the vintage case of
Philippine Banking Corporation v. Tensuan,31 is that while they are considered valid and
enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth
in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They
should be considered merely as an agreement or additional forum, not as limiting venue to the
specified place. They are not exclusive but, rather permissive. If the intention of the parties were

77
 23. Biaco v. Countryside Rural Bank – Jurisdiction v. Venue
Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision 1 of the Court of Appeals in
CA-G.R. No. 67489 dated August 27, 2003, which denied her petition for annulment of judgment,
and the Resolution2 dated December 15, 2003 which denied her motion for reconsideration.
The facts as succinctly stated by the Court of Appeals are as follows:
Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves Biaco. While employed in the
Philippine Countryside Rural Bank (PCRB) as branch manager, Ernesto obtained several loans
from the respondent bank as evidenced by the following promissory notes:
Feb. 17, 1998 ₱ 65,000.00
Mar. 18, 1998 30,000.00
May 6, 1998 60,000.00
May 20, 1998 350,000.00
July 30, 1998 155,000.00
Sept. 8, 1998 40,000.00
Sept. 8, 1998 120,000.00
As security for the payment of the said loans, Ernesto executed a real estate mortgage in favor of
the bank covering the parcel of land described in Original Certificate of Title (OCT) No. P-14423.
The real estate mortgages bore the signatures of the spouses Biaco.
When Ernesto failed to settle the above-mentioned loans on its due date, respondent bank through
counsel sent him a written demand on September 28, 1999. The amount due as of September 30,
1999 had already reached ONE MILLION EIGHTY THOUSAND SIX HUNDRED SEVENTY SIX
AND FIFTY CENTAVOS (₱1,080,676.50).
The written demand, however, proved futile.
On February 22, 2000, respondent bank filed a complaint for foreclosure of mortgage against the
spouses Ernesto and Teresa Biaco before the RTC of Misamis Oriental. Summons was served to
the spouses Biaco through Ernesto at his office (Export and Industry Bank) located at Jofelmor
Bldg., Mortola Street, Cagayan de Oro City.
Ernesto received the summons but for unknown reasons, he failed to file an answer. Hence, the
spouses Biaco were declared in default upon motion of the respondent bank. The respondent
bank was allowed to present its evidence ex parte before the Branch Clerk of Court who was then
appointed by the court as Commissioner.
Arturo Toring, the branch manager of the respondent bank, testified that the spouses Biaco had
been obtaining loans from the bank since 1996 to 1998. The loans for the years 1996-1997 had
already been paid by the spouses Biaco, leaving behind a balance of ₱1,260,304.33 representing
the 1998 loans. The amount being claimed is inclusive of interests, penalties and service charges
as agreed upon by the parties. The appraisal value of the land subject of the mortgage is only
₱150,000.00 as reported by the Assessor’s Office.
Based on the report of the Commissioner, the respondent judge ordered as follows:
WHEREFORE, judgment is hereby rendered ordering defendants spouses ERNESTO R. BIACO
and MA. THERESA [CHAVES] BIACO to pay plaintiff bank within a period of not less than ninety
(90) days nor more than one hundred (100) days from receipt of this decision the loan of ONE
MILLION TWO HUNDRED SIXTY THOUSAND THREE HUNDRED FOUR PESOS and THIRTY
THREE CENTAVOS (₱1,260,304.33) plus litigation expenses in the amount of SEVEN
THOUSAND SIX HUNDRED FORTY PESOS (₱7,640.00) and attorney’s fees in the amount of
TWO HUNDRED FIFTY TWO THOUSAND THIRTY PESOS and FORTY THREE CENTAVOS
(₱252,030.43) and cost of this suit.
In case of non-payment within the period, the Sheriff of this Court is ordered to sell at public auction
the mortgaged Lot, a parcel of registered land (Lot 35802, Cad. 237 {Lot No. 12388-B, Csd-10-
002342-D}), located at Gasi, Laguindingan, Misamis Oriental and covered by TCT No. P-14423
to satisfy the mortgage debt, and the surplus if there be any should be delivered to the defendants
spouses ERNESTO and MA. THERESA [CHAVES] BIACO. In the event however[,] that the
proceeds of the auction sale of the mortgage[d] property is not enough to pay the outstanding
obligation, the defendants are ordered to pay any deficiency of the judgment as their personal
liability.
SO ORDERED.
On July 12, 2000, the sheriff personally served the above-mentioned judgment to Ernesto Biaco
at his office at Export and Industry Bank. The spouses Biaco did not appeal from the adverse
decision of the trial court. On October 13, 2000, the respondent bank filed an ex parte motion for
execution to direct the sheriff to sell the mortgaged lot at public auction. The respondent bank
alleged that the order of the court requiring the spouses Biaco to pay within a period of 90 days
had passed, thus making it necessary to sell the mortgaged lot at public auction, as previously
mentioned in the order of the court. The motion for execution was granted by the trial court per
Order dated October 20, 2000.
On October 31, 2000, the sheriff served a copy of the writ of execution to the spouses Biaco at
their residence in #92 9th Street, Nazareth, Cagayan de Oro City. The writ of execution was
personally received by Ernesto. By virtue of the writ of execution issued by the trial court, the
mortgaged property was sold at public auction in favor of the respondent bank in the amount of
ONE HUNDRED FIFTY THOUSAND PESOS (₱150,000.00).
The amount of the property sold at public auction being insufficient to cover the full amount of the
obligation, the respondent bank filed an "ex parte motion for judgment" praying for the issuance
of a writ of execution against the other properties of the spouses Biaco for the full settlement of
the remaining obligation. Granting the motion, the court ordered that a writ of execution be issued
against the spouses Biaco to enforce and satisfy the judgment of the court for the balance of ONE
MILLION THREE HUNDRED SIXTY NINE THOUSAND NINE HUNDRED SEVENTY FOUR
PESOS AND SEVENTY CENTAVOS (₱1,369,974.70).
78
The sheriff executed two (2) notices of levy against properties registered under the name of
petitioner Ma. Teresa Chaves Biaco. However, the notices of levy were denied registration
because Ma. Teresa had already sold the two (2) properties to her daughters on April 11, 2001. 3
Petitioner sought the annulment of the Regional Trial Court decision contending that extrinsic fraud
prevented her from participating in the judicial foreclosure proceedings. According to her, she
came to know about the judgment in the case only after the lapse of more than six (6) months
after its finality. She claimed that extrinsic fraud was perpetrated against her because the bank
failed to verify the authenticity of her signature on the real estate mortgage and did not inquire into
the reason for the absence of her signature on the promissory notes. She moreover asserted that
the trial court failed to acquire jurisdiction because summons were served on her through her
husband without any explanation as to why personal service could not be made.
The Court of Appeals considered the two circumstances that kept petitioner in the dark about the
judicial foreclosure proceedings: (1) the failure of the sheriff to personally serve summons on
petitioner; and (2) petitioner’s husband’s concealment of his knowledge of the foreclosure
proceedings. On the validity of the service of summons, the appellate court ruled that judicial
foreclosure proceedings are actions quasi in rem. As such, jurisdiction over the person of the
defendant is not essential as long as the court acquires jurisdiction over the res. Noting that the
spouses Biaco were not opposing parties in the case, the Court of Appeals further ruled that the
fraud committed by one against the other cannot be considered extrinsic fraud.
Her motion for reconsideration having been denied, petitioner filed the instant Petition for
Review,4 asserting that even if the action is quasi in rem, personal service of summons is essential
in order to afford her due process. The substituted service made by the sheriff at her husband’s
office cannot be deemed proper service absent any explanation that efforts had been made to
personally serve summons upon her but that such efforts failed. Petitioner contends that extrinsic
fraud was perpetrated not so much by her husband, who did not inform her of the judicial
foreclosure proceedings, but by the sheriff who allegedly connived with her husband to just leave
a copy of the summons intended for her at the latter’s office.
Petitioner further argues that the deficiency judgment is a personal judgment which should be
deemed void for lack of jurisdiction over her person.
Respondent PCRB filed its Comment,5 essentially reiterating the appellate court’s ruling.
Respondent avers that service of summons upon the defendant is not necessary in actions quasi
in rem it being sufficient that the court acquire jurisdiction over the res. As regards the alleged
conspiracy between petitioner’s husband and the sheriff, respondent counters that this is a new
argument which cannot be raised for the first time in the instant petition.
We required the parties to file their respective memoranda in the Resolution6 dated August 18,
2004. Accordingly, petitioner filed her Memorandum 7 dated October 10, 2004, while respondent
filed its Memorandum for Respondent8dated September 9, 2004.
Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as
where there is no available or other adequate remedy. Jurisprudence and Sec. 2, Rule 47 of the
1997 Rules of Civil Procedure (Rules of Court) provide that judgments may be annulled only on
grounds of extrinsic fraud and lack of jurisdiction or denial of due process. 9
Petitioner asserts that extrinsic fraud consisted in her husband’s concealment of the loans which
he obtained from respondent PCRB; the filing of the complaint for judicial foreclosure of mortgage;
service of summons; rendition of judgment by default; and all other proceedings which took place
until the writ of garnishment was served.10
Extrinsic fraud exists when there is a fraudulent act committed by the prevailing party outside of
the trial of the case, whereby the defeated party was prevented from presenting fully his side of
the case by fraud or deception practiced on him by the prevailing party.11 Extrinsic fraud is present
where the unsuccessful party had been prevented from exhibiting fully his case, by fraud or
deception practiced on him by his opponent, as by keeping him away from court, a false promise
of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance
by the acts of the plaintiff; or where an attorney fraudulently or without authority assumes to
represent a party and connives at his defeat; or where the attorney regularly employed corruptly
sells out his client’s interest to the other side. The overriding consideration is that the fraudulent
scheme of the prevailing litigant prevented a party from having his day in court.12
With these considerations, the appellate court acted well in ruling that there was no fraud
perpetrated by respondent bank upon petitioner, noting that the spouses Biaco were co-
defendants in the case and shared the same interest. Whatever fact or circumstance concealed
by the husband from the wife cannot be attributed to respondent bank.
Moreover, petitioner’s allegation that her signature on the promissory notes was forged does not
evince extrinsic fraud. It is well-settled that the use of forged instruments during trial is not extrinsic
fraud because such evidence does not preclude the participation of any party in the proceedings. 13
The question of whether the trial court has jurisdiction depends on the nature of the
action, i.e., whether the action is in personam, in rem, or quasi in rem. The rules on service of
summons under Rule 14 of the Rules of Court likewise apply according to the nature of the action.
An action in personam is an action against a person on the basis of his personal liability. An action
in rem is an action against the thing itself instead of against the person. An action quasi in rem is
one wherein an individual is named as defendant and the purpose of the proceeding is to subject
his interest therein to the obligation or lien burdening the property.14
In an action in personam, jurisdiction over the person of the defendant is necessary for the court
to validly try and decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the
person of the defendant is not a prerequisite to confer jurisdiction on the court provided that the
court acquires jurisdiction over the res. Jurisdiction over the res is acquired either (1) by the seizure
of the property under legal process, whereby it is brought into actual custody of the law; or (2) as
a result of the institution of legal proceedings, in which the power of the court is recognized and
made effective.15
Nonetheless, summons must be served upon the defendant not for the purpose of vesting the
court with jurisdiction but merely for satisfying the due process requirements.16
A resident defendant who does not voluntarily appear in court, such as petitioner in this case, must
be personally served with summons as provided under Sec. 6, Rule 14 of the Rules of Court. If
she cannot be personally served with summons within a reasonable time, substituted service may
be effected (1) by leaving copies of the summons at the defendant’s residence with some person
of suitable age and discretion then residing therein, or (2) by leaving the copies at defendant’s
office or regular place of business with some competent person in charge thereof in accordance
with Sec. 7, Rule 14 of the Rules of Court.
In this case, the judicial foreclosure proceeding instituted by respondent PCRB undoubtedly
vested the trial court with jurisdiction over the res. A judicial foreclosure proceeding is an
action quasi in rem. As such, jurisdiction over the person of petitioner is not required, it being
sufficient that the trial court is vested with jurisdiction over the subject matter.
79
There is a dimension to this case though that needs to be delved into. Petitioner avers that she Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et. al.20 and Perkins v.
was not personally served summons. Instead, summons was served to her through her husband Dizon, et al.21 that in a proceeding in rem or quasi in rem, the only relief that may be granted by
at his office without any explanation as to why the particular surrogate service was resorted to. the court against a defendant over whose person it has not acquired jurisdiction either by valid
The Sheriff’s Return of Service dated March 21, 2000 states: service of summons or by voluntary submission to its jurisdiction, is limited to the res.

xxxx Similarly, in this case, while the trial court acquired jurisdiction over the res, its jurisdiction is limited
to a rendition of judgment on the res. It cannot extend its jurisdiction beyond the res and issue a
judgment enforcing petitioner’s personal liability. In doing so without first having acquired
That on March 16, 2000, the undersigned served the copies of Summons, complaint and its
jurisdiction over the person of petitioner, as it did, the trial court violated her constitutional right to
annexes to the defendants Sps. Ernesto R. & Ma. Teresa Ch. Biaco thru Ernesto R. Biaco[,]
due process, warranting the annulment of the judgment rendered in the case.
defendant of the above-entitled case at his office EXPORT & INDUSTRY BANK, Jofelmore Bldg.[,]
Mortola St., Cagayan de Oro City and he acknowledged receipt thereof as evidenced with his
signature appearing on the original copy of the Summons.17 [Emphasis supplied] WHEREFORE, the instant petition is GRANTED. The Decision dated August 27, 2003 and the
Resolution dated December 15, 2003 of the Court of Appeals in CA-G.R. SP No. 67489 are SET
ASIDE. The Judgment dated July 11, 2000 and Order dated February 9, 2001 of the Regional
Without ruling on petitioner’s allegation that her husband and the sheriff connived to prevent
Trial Court of Cagayan de Oro City, Branch 20, are likewise SET ASIDE.
summons from being served upon her personally, we can see that petitioner was denied due
process and was not able to participate in the judicial foreclosure proceedings as a consequence.
The violation of petitioner’s constitutional right to due process arising from want of valid service of SO ORDERED.
summons on her warrants the annulment of the judgment of the trial court.

There is more, the trial court granted respondent PCRB’s ex-parte motion for deficiency judgment
and ordered the issuance of a writ of execution against the spouses Biaco to satisfy the remaining
balance of the award. In short, the trial court went beyond its jurisdiction over the res and rendered
a personal judgment against the spouses Biaco. This cannot be countenanced.1awphil.net

In Sahagun v. Court of Appeals,18 suit was brought against a non-resident defendant, Abelardo
Sahagun, and a writ of attachment was issued and subsequently levied on a house and lot
registered in his name. Claiming ownership of the house, his wife, Carmelita Sahagun, filed a
motion to intervene. For failure of plaintiff to serve summons extraterritorially upon Abelardo, the
complaint was dismissed without prejudice.

Subsequently, plaintiff filed a motion for leave to serve summons by publication upon Abelardo.
The trial court granted the motion. Plaintiff later filed an amended complaint against Abelardo, this
time impleading Carmelita and Rallye as additional defendants. Summons was served on
Abelardo through publication in the Manila Evening Post. Abelardo failed to file an answer and
was declared in default. Carmelita went on certiorari to the Court of Appeals assailing as grave
abuse of discretion the declaration of default of Abelardo. The Court of Appeals dismissed the
petition and denied reconsideration.

In her petition with this Court, Carmelita raised the issue of whether the trial court acquired
jurisdiction over her husband, a non-resident defendant, by the publication of summons in a
newspaper of general circulation in the Philippines. The Court sustained the correctness of
extrajudicial service of summons by publication in such newspaper.

The Court explained, citing El Banco Español-Filipino v. Palanca,19 that foreclosure and
attachment proceedings are both actions quasi in rem. As such, jurisdiction over the person of the
(non-resident) defendant is not essential. Service of summons on a non-resident defendant who
is not found in the country is required, not for purposes of physically acquiring jurisdiction over his
person but simply in pursuance of the requirements of fair play, so that he may be informed of the
pendency of the action against him and the possibility that property belonging to him or in which
he has an interest may be subjected to a judgment in favor of a resident, and that he may thereby
be accorded an opportunity to defend in the action, should he be so minded.

80
 24. BPI v. Yujuico – Jurisdiction v. Venue The respondents then filed their reply, 11 in which they raised for the first time their objection on
the ground of improper venue. They contended that the action for the recovery of the deficiency,
being a supplementary action of the extrajudicial foreclosure proceedings, was a real action that
should have been brought in the Manila RTC because Manila was the place where the properties
An action to recover the deficiency after extrajudicial foreclosure of a real property mortgage is a
were located.12
personal action because it does not affect title to or possession of real property, or any interest
therein.
On February 1, 2005, the Makati RTC denied the respondents' motion for reconsideration for its
lack of merit; and held on the issue of improper venue that:
The Case

It would be improper for this Court to dismiss the plaintiffs complaint on the ground of improper
This appeal is taken by the petitioner to overturn the decision promulgated on March 31,
venue, assuming that the venue is indeed improperly laid, since the said ground was not raised in
2006,1 whereby the Court of Appeals (CA) set aside the orders issued by the Regional Trial Court,
the defendant's Motion to Dismiss. On this point, it was held in the case of Malig, et al. vs. Bush,
Branch 60, in Makati City (Makati RTC) on October 17, 2003 2 and February 1, 2005 3 dismissing
L 22761, May 31, 1969 that "an action cannot be dismissed on a ground not alleged in the motion
therefore even if said ground, e.g., prescription, is provided in Rule 16. 13
their action against the respondents to recover the deficiency after the extrajudicial foreclosure of
their mortgage (Civil Case No.03-450) on the ground of improper venue.
Decision of the CA

Antecedents
Not satisfied, the respondents assailed the orders dated October 1 7, 2003 and February 1, 2005
by petition for certiorari.14 They submitted for consideration by the CA the following issues, namely:
On August 22, 1996, the City of Manila filed a complaint against the respondents for the
expropriation of five parcels of land located in Tondo, Manila and registered in the name of
x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT COMMITTED GRAVE ABUSE OF
respondent Teresita Yujuico. Two of the parcels of land, covered by Transfer Certificate of Title
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED ITS
(TCT) No. 261331 and TCT No. 261332, were previously mortgaged to Citytrust Banking
ASSAILED ORDERS CONSIDERING THAT:
Corporation, the petitioner's predecessor-in-interest, under a First Real Estate Mortgage
Contract.4On June 30, 2000, the Regional Trial Court in Manila (Manila RTC) rendered its
judgment declaring the five parcels of land expropriated for public use. The judgment became final A THE COMPLAINT A QUO IS BARRED BY RES JUDICATA.
and executory on January 28, 2001 and was entered in the book of entries of judgment on March
23, 2001.5 The petitioner subsequently filed a Motion to Intervene in Execution with Partial
B. THE COMPLAINT STATED NO CAUSE OF ACTION.
Opposition to Defendant's Request to Release, but the RTC denied the motion for having been
"filed out of time." Hence, the petitioner decided to extrajudicially foreclose the mortgage
constituted on the two parcels of land subject of the respondents' loan. After holding the public C. PRIVATE RESPONDENT'S CLAIM HAS BEEN WAIVED, ABANDONED OR
auction, the sheriff awarded the two lots to the petitioner as the highest bidder at ₱10, 000, OTHERWISE EXTINGUISHED.
000.00. 6
D. VENUE WAS IMPROPERLY LAID. 15
Claiming a deficiency amounting to Pl8, 522155.42, the pet1t1oner sued the respondents to
recover such deficiency in the Makati RTC (Civil Case No. 03-450).1âwphi1 The respondents
moved to dismiss the complaint on several grounds, namely: that the suit was barred by res On March 31, 2006, the CA granted the petition for certiorari of the respondents on the basis of
judicata; that the complaint stated no cause of action; and that the plaintiffs claim had been waived, the fourth issue, opining:
abandoned, or extinguished. 7
xxxx
In its order issued on October 17, 2003, the Makati RTC denied the respondents' motion to
dismiss, ruling that there was no res judicata; that the complaint stated a sufficient cause of action Thus, a suit for recovery of the deficiency after the foreclosure of a mortgage is in the nature of a
to recover the deficiency; and that there was nothing to support the claim that the obligation had mortgage action because its purpose is precisely to enforce the mortgage contract; it is upon a
been abandoned or extinguished apart from the respondents' contention that the properties had written contract and upon an obligation of the mortgage-debtor to pay the deficiency which is
been subjected to expropriation by the City of Manila.8 created by law. As such, the venue of an action for recovery of deficiency must necessarily be the
same venue as that of the extrajudicial foreclosure of mortgage.
On November 4, 2003, the respondents moved for reconsideration, reiterating their grounds earlier
made in their motion to dismiss. 9 xxxx

10
In turn, the petitioner adopted its comment/opposition to the motion to dismiss. In this regard, We take note that the parcels of land subject of the mortgage contract are located
in Tondo, Manila, under Transfer Certificates of Title Nos. 216331 and 216332. On the other hand,
the extrajudicial foreclosure of the real estate mortgage took place at the R TC of Manila on

81
January 28, 2003. Thus, the suit for judgment on the deficiency filed by respondent BPI against
petitioners Yujuico, being an action emanating from the foreclosure of the real estate mortgage
contract between them, must necessarily be filed also at the RTC of Manila, not at the RTC of
Makati.
x x x x 16
The CA denied the respondents' Motion for Partial Reconsideration and the petitioner's Partial
Motion for Reconsideration on December 7, 2006.17
Issues
Hence, this appeal by the petitioner, to assail the CA's dismissal of Civil Case No. 03-450 on the
ground of improper venue upon the following grounds,18 namely:
I.
WHETHER OR NOT THE HONORA.BLE COURT OF APPEALS' DENIAL OF THE
PETITIONER'S PARTIAL MOTION FOR RECONSIDERATION ON THE GROUND OF
IMPROPER VENUE AS A RESULT DISMISSED THE COMPLAINT FOR SUM OF MONEY IS
CONTRARY TO LAW.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS['] ACT OF APPRECIATING THE
ADDITIONAL GROUND OF IMPROPER VENUE, ONLY RAISED IN THE MOTION FOR
RECONSIDERATION FILED IN THE LOWER COURT AFTER IT DENIED RESPONDENTS'
MOTION TO DISMISS, IS CONTRARY TO LAW AND JURISPRUDENCE.19
Ruling of the Court
We grant the petition for review on certiorari.
It is basic that the venue of an action depends on whether it is a real or a personal action. The
determinants of whether an action is of a real or a personal nature have been fixed by the Rules
of Court and relevant jurisprudence. According to Section 1, Rule 4 of the Rules of Court, a real
action is one that affects title to or possession of real property, or an interest therein. Thus, an
action for partition or condemnation of, or foreclosure of mortgage on, real property is a real
action. 20 The real action is to be commenced and tried in the proper court having jurisdiction over
the area wherein the real property involved, or a portion thereof, is situated, which explains why
the action is also referred to as a local action. In contrast, the Rules of Court declares all other
actions as personal actions. 21 such actions may include those brought for the recovery of personal
property, or for the enforcement of some contract or recovery of damages for its breach, or for the
recovery of damages for the commission of an injury to the person or property.22 The venue of a
personal action is the place where the plaintiff or any of the principal plaintiffs resides, or where
the defendant or any of the principal defendants resides, or in the case of a non-resident defendant
where he may be found, at the election of the plaintiff, 23 for which reason the action is considered
a transitory one.
Based on the distinctions between real and personal actions, an action to recover the deficiency
after the extrajudicial foreclosure of the real property mortgage is a personal action, for it does not
affect title to or possession of real property, or any interest therein.
It is true that the Court has said in Caltex Philippines, Inc. v. Intermediate Appellate Court 24 that
"a suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a
mortgage action because its purpose is precisely to enforce the mortgage contract." However, the
CA erred in holding, upon the authority of Caltex Philippines, Inc., that the venue of Civil Case No.
03 450 must necessarily be Manila, the same venue as that of the extrajudicial foreclosure of
mortgage. An examination of Caltex Philippines, Inc. reveals that the Court was thereby only
interpreting the prescriptive period within which to bring the suit for the recovery of the deficiency
after the foreclosure of the mortgage, and was not at all ruling therein on the venue of such suit or
on the nature of such suit being either a real or a personal action.
Given the foregoing, the petitioner correctly brought Civil Case No.03-450 in the Makati RTC
because Makati was the place where the main office of the petitioner was located.1avvphi1
Moreover, the Makati RTC observed, and the observation is correct in our view, that it would be
improper to dismiss Civil Case No. 03-450 on the ground of improper venue, assuming that the
venue had been improperly laid, considering that the respondents had not raised such ground in
their Motion to Dismiss. As earlier indicated, they came to raise the objection of improper venue
for the first time only in their reply to the petitioner's comment on their Motion for Reconsideration.
They did so belatedly.
We underscore that in civil proceedings, venue is procedural, not jurisdictional, and may be waived
by the defendant if not seasonably raised either in a motion to dismiss or in the answer. 25 Section
1, Rule 9 of the Rules of Court thus expressly stipulates that defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived. As it relates to the place of trial,
indeed, venue is meant to provide convenience to the parties, rather than to restrict their access
to the courts.26 In other words, unless the defendant seasonably objects, any action may be tried
by a court despite its being the improper venue.
WHEREFORE, we GRANT the petition for review on certiorari; REVERSE and SET ASIDE the
decision promulgated by the Court of Appeals on March 31, 2006; REINSTATE the orders dated
October 17, 2003 and February 1, 2005 of the Regional Trial Court, Branch 60, in Makati City; and
ORDER the respondents to pay the costs of suit.
SO ORDERED.
82
 25. Planters Dev. Bank v. Ramos – Jurisdiction v. Venue contract (par. 20, Complaint). As such, this Court has to apply Section 1, Rule 4 of the 1997 Rules
of Civil Procedure regarding the venue of real actions to avoid ruling on the merits without any
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, evidence that would sufficiently support the same.
assailing the Decision[1] dated July 5, 2016 and Resolution[2] dated December 7, 2016 of the Court
of Appeals (CA) in CA-G.R. SP No. 140264. II. The Complaint Fails to State a Cause of Action.

With such an issue raised, the Court examined the records and it has to tell the defendants that in
Antecedent Facts civil cases before the Court orders the issuance of summons, it looks on whether or not the facts
alleged on the Complaint are sufficient to constitute a cause of action and not whether the
The facts show that in July 2012, Spouses Victoriano and Melanie Ramos (Spouses Ramos) allegations of fact are true. Hence, as summons were issued in this case, the Court had already
applied for several credit lines with Planters Development Bank (PDB) for the construction of a found that the allegations in the Complaint are sufficient to constitute a cause of action.
warehouse in Barangay Santo Tomas, Nueva Ecija.[3] The said application was approved for
P40,000,000.00, secured by Real Estate Mortgage[4]dated July 25, 2012 over properties owned x x x x
by the spouses, particularly covered by Transfer Certificate of Title (TCT) Nos. 048-2011000874
and 048-2011000875. FOREGOING CONSIDERED, the Motion to Dismiss is hereby DENIED.

Subsequently, Spouses Ramos requested for additional loan and PDB allegedly promised to x x x x
extend them a further loan of P140,000,000.00, the amount they supposed was necessary for the
completion of the construction of the warehouse with a capacity of 250,000 cavans of SO ORDERED.[13]
palay.[5] Despite the assurance of the bank, only P25,000,000.00 in additional loan was approved Unyielding, PDB filed a motion for reconsideration of the Omnibus Order dated November 17,
and released by PDB, which was secured by a Real Estate Mortgage[6] over four (4) real properties 2014, instead of filing an answer to the complaint. This prompted Spouses Ramos to file a motion
covered by TCT Nos. 048-2012000909, 048-2012000443, 048-2012000445, and 048- to declare PDB in default. Subsequently, in an Order[14] dated February 20, 2015, the RTC denied
2012000446. both motions, ratiocinating thus:

Due to financial woes, Spouses Ramos were not able to pay their obligations as they fell due. Necessarily, the defendants were allowed to Isle Motion to Dismiss before filing an Answer or
They appealed to PDB for the deferment of debt servicing and requested for a restructuring responsive pleading. As a consequence of the Motion to Dismiss that the defendants filed, the
scheme but the parties failed to reach an agreement. running of the period during which the rules required her to file her Answer was deemed
suspended. When the Court denied the Motion to Dismiss, therefore the defendants had the
On April 23, 2014, PDB filed a Petition for Extra-judicial Foreclosure of Real Estate Mortgage balance of the period for filing an Answer under Section 4, Rule 16 within which to file the same
under Act 3135, as amended, before the Regional Trial Court of San Jose City, Nueva Ecija, which but in no case less than five days, computed from the receipt of the notice of denial of the Motion
was docketed as EJF-2014-112-SJC. A Notice to Parties of Sheriff's Public Auction Sale dated to Dismiss. x x x x
May 7, 2014 was thereafter issued.[7]
x x x x
On June 18, 2014, Spouses Ramos filed a Complaint[8] for Annulment of Real Estate Mortgages
and Promissory Notes, Accounting and Application of Payments, Injunction with Preliminary However, after the Court denied the Motion to Dismiss, the defendants filed Motion for
Injunction and Temporary Restraining Order against PDB and its officers, namely, Ma. Agnes J. Reconsideration which is not precluded by the rules. Only after this Court shall have denied it
Angeles, Virgilio I. Libunao, Carmina S. Magallanes and Norberto P. Siega, also before the RTC would the defendants become bound to file the Answer to the Complaint. It is only if the defendants
of San Jose City, Nueva Ecija, which was docketed as Civil Case No. 2014-485-SJC. failed to file Answer after the period given by the foregoing rules would the plaintiff be entitled to
have the defendants be declared in default. This was the same ruling of the Supreme Court in the
Instead of filing an Answer, PDB filed an Urgent Motion[9] to Dismiss, alleging that the venue of case of Narciso v. Garcia, G.R. No. 196877, November 12, 2012.
the action was improperly laid considering that the real estate mortgages signed by the parties
contained a stipulation that any suit arising therefrom shall be filed in Makati City only.[10] It further With regard to the Motion for Reconsideration of the Omnibus Order dated November 17, 2014,
noted that the complaint failed to state a cause of action and must therefore be dismissed.[11] there being no new arguments presented, the Court finds no cogent reason to reconsider and
reverse the said Omnibus Order.

Ruling of the RTC WHEREFORE, the Motion to Declare Defendants in Default and the Motion for Reconsideration
are hereby DENIED.
In an Omnibus Order[12] dated November 17, 2014, the RTC denied the Urgent Motion to Dismiss,
the pertinent portions of which read as follows: SO ORDERED.[15]
Aggrieved, PDB filed a petition for certiorari with the CA, imputing grave abuse of discretion on
I. The Venue is Improperly Laid the RTC for denying its motion to dismiss, despite the fact that the venue was clearly improperly
laid.
Pursuant to autonomy of contract, Venue can be waived. Rule 5, Section 4(d) of the 1997 Rules
of Civil Procedure allows parties to validly agree in writing before the filing of the action on the
exclusive venue thereof. Indeed, on the defendants they have the contract where the venue Ruling of the CA
allegedly agreed upon by them with the plaintiffs is Makati City. However, one of the contentions
of the plaintiffs is that the contracts between them and the defendants take the form of an adhesion In a Decision[16] dated July 5, 2016, the CA denied the petition, the pertinent portion of which reads
83
as follows:
(b) Where the parties have validly agreed in writing before the filing of the action on the exclusive
The order of the public respondent in denying the motion to dismiss and the consequent denial of venue thereof
the motion for reconsideration is correct and judicious. Petitioner anchors its claim on the validity Based on the foregoing, the general rules on venue admit of exceptions in Section 4 thereof, i.e.,
of the mortgage, and thereby the provisional therein on venue must be upheld. On the other hand, where a specific rule or law provides otherwise, or when the parties agreed in writing before the
respondents anchor its claim on the invalidity of the mortgage, and thereby the complaint is filed filing of the action on the exclusive venue thereof.
in the proper venue. Clearly, no valid judgment can be passed upon the allegations of both
parties.[17] Stipulations on venue, however, may either be permissive or restrictive. "Written stipulations as to
venue may be restrictive in the sense that the suit may be filed only in the place agreed upon, or
Thus, having found no grave abuse on the part of the public respondent in denying the motion to merely permissive in that the parties may file their suit not only in the place agreed upon but also
dismiss and the resulting denial of the motion for reconsideration, We find no cogent reason to in the places fixed by law. As in any other agreement, what is essential is the ascertainment of the
disturb or modify the assailed Decision. What the petitioners should have done was to file an intention of the parties respecting the matter."[21]
answer to the petition filed in the trial court, proceed to the hearing and appeal the decision of the
court if adverse to them.[18] Further, in Unimasters Conglomeration, Inc. v. Court of Appeals,[22] the Court elaborated, thus:

WHEREFORE, premises considered, the petition is DENIED. The Omnibus Order dated 17 Since convenience is the raison d'etre of the rules of venue, it is easy to accept the proposition
November 2014 and the Order dated 20 February 2015 is hereby AFFIRMED in TOTO. that normally, venue stipulations should be deemed permissive merely, and that interpretation
should be adopted which most serves the parties' convenience. In other words, stipulations
IT IS SO ORDERED.[19] designating venues other than those assigned by Rule 4 should be interpreted as designed to
PDB filed a motion for reconsideration but the CA denied the same in its Resolution dated make it more convenient for the parties to institute actions arising from or in relation to their
December 7, 2016, the dispositive portion of which reads, thus: agreements; that is to say, as simply adding to or expanding the venues indicated in said Rule 4.

WHEREFORE, in view of the foregoing, the motion for reconsideration is hereby DENIED. On the other hand, because restrictive stipulations are in derogation of this general policy, the
language of the parties must be so clear and categorical as to leave no doubt of their intention to
IT IS SO ORDERED.[20] limit the place or places, or to fix places other than those indicated in Rule 4, for their actions. x x
Unyielding, PDB filed the present petition with this Court, reiterating its claim that the CA erred in x.[23]
affirming the order of the RTC, which denied the motion to dismiss despite the improper venue of In view of the predilection to view a stipulation on venue as merely permissive, the parties must
the case. It argues that since there is a stipulation on venue, the same should govern the parties. therefore employ words in the contract that would clearly evince a contrary intention. In Spouses
Lantin v. Judge Lantion,[24] the Court emphasized that "the mere stipulation on the venue of an
action is not enough to preclude parties from bringing a case in other venues. The parties must
Ruling of this Court be able to show that such stipulation is exclusive. In the absence of qualifying or restrictive words,
the stipulation should be deemed as merely an agreement on an additional forum, not as limiting
The petition is meritorious. venue to the specified place."[25]

Rule 4 of the Rules of Civil Procedure provides the rules on venue in filing an action, to wit: In the instant case, there is an identical stipulation in the real estate mortgages executed by the
parties, pertaining to venue. It reads as follows:
RULE 4
18. In the event of suit arising from out of or in connection with this mortgage and/or the promissory
Venue of Actions note/s secured by this mortgage, the parties hereto agree to bring their causes of
action exclusively in the proper court/s of Makati, Metro Manila, the MORTGAGOR waiving for
Section 1. Venue of real actions. — Actions affecting title to or possession of real property, or this purpose any other venue.[26](Emphasis ours)
interest therein, shall be commenced and tried in the proper court which has jurisdiction over the In Spouses Lantin, the Court ruled that "the words exclusively and waiving for this purpose any
area wherein the real property involved, or a portion thereof, is situated. other venue are restrictive."[27] Therefore, the employment of the same language in the subject
mortgages signifies the clear intention of the parties to restrict the venue of any action or suit that
Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the may arise out of the mortgage to a particular place, to the exclusion of all other jurisdictions.
municipality or city wherein the real property involved, or a portion thereof, is situated.
In view of the foregoing, the RTC should have granted the Urgent Motion to Dismiss filed by PDB
Section 2. Venue of personal actions. — All other actions may be commenced and tried where on the ground that the venue was improperly laid. The complaint being one for annulment of real
the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal estate mortgages and promissory notes is in the nature of a personal action, the venue of which
defendants resides, or in the case of a non-resident defendant where he may be found, at the may be fixed by the parties to the contract. In this case, it was agreed that any suit or action that
election of the plaintiff. may arise from the mortgage contracts or the promissory notes must be filed and tried in Makati
only. Not being contrary to law or public policy, the stipulation on venue, which PDB and Spouses
x x x x Ramos freely and willingly agreed upon, has the force of law between them, and thus, should be
complied with in good faith.[28]
Section 4. When Rule not applicable. — This Rule shall not apply.
The CA, however, ruled that the RTC correctly denied the motion to dismiss in view of the
(a) In those cases where a specific rule or law provides otherwise; or contradicting claim of the parties on the validity of the mortgage contracts, which, in turn, affects
84
the enforceability of the stipulation on venue. The CA agreed with the RTC that the ruling on the
validity of the stipulation on venue depends on whether the mortgage is valid which means there
has to be full-blown hearing and presentation of evidence. It added that what PDB should have
done was to file an answer to the complaint, proceed to trial and appeal the decision, if adverse
to them.[29]

The ruling of the CA renders meaningless the very purpose of the stipulation on venue.
In Unimasters, the Court emphasized:

Parties may by stipulation waive the legal venue and such waiver is valid and effective being
merely a personal privilege, which is not contrary to public policy or prejudicial to third persons. It
is a general principle that a person may renounce any right which the law gives unless such
renunciation would be against public policy.[30]
In the present case, Spouses Ramos had validly waived their right to choose the venue for any
suit or action arising from the mortgages or promissory notes when they agreed to the limit the
same to Makati City only and nowhere else. True enough, the stipulation on the venue was
couched in a language showing the intention of the parties to restrict the filing of any suit or action
to the designated place only. It is crystal clear that the intention was not just to make the said place
an additional forum or venue but the only jurisdiction where any suit or action pertaining to the
mortgage contracts may be filed. There being no showing that such waiver was invalid or that the
stipulation on venue was against public policy, the agreement of the parties should be upheld. It
is therefore a grave abuse of discretion on the part of the RTC to deny the motion to dismiss filed
by PDB on the ground of improper venue, especially when the said issue had been raised at the
most opportune time, that is, within the time for but before the filing of an answer. The CA should
have given this matter a more serious consideration and not simply brushed it aside.

Moreover, Spouses Ramos never really assailed the validity of the mortgage contracts and
promissory notes. Apparently, what they were only claiming was that the said contracts contain
stipulations which are illegal, immoral and otherwise contrary to customs or public policy. [31] For
instance, they alleged that the interest was pegged at an excessive rate of 8% which the bank
unilaterally increased to 9%. They likewise claimed that the penalty interest rate of 3% was
unconscionable. Further, they claimed that the escalation clause provided in the mortgage
contracts was violative of Presidential Decree No. 1684.[32] These matters, however, do not affect
the validity of the mortgage contracts. Thus, with all the more reason that the stipulation on venue
should have been upheld pursuant to the ruling of the Court in Briones v. Court of Appeals,[33] viz.:

[I]n cases where the complaint assails only the terms, conditions, and/or coverage of a written
instrument and not its validity, the exclusive venue stipulation contained therein shall still be
binding on the parties, and thus, the complaint may be properly dismissed on the ground of
improper venue. Conversely, therefore, a complaint directly assailing the validity of the written
instrument itself should not be bound by the exclusive venue stipulation contained therein and
should be filed in accordance with the general rules on venue. To be sure, it would be inherently
consistent for a complaint of this nature to recognize the exclusive venue stipulation when it, in
fact, precisely assails the validity of the instrument in which such stipulation is contained.[34]
Spouses Ramos impliedly admitted the authenticity and due execution of the mortgage contracts.
They do not claim to have been duped into signing the mortgage contracts or that the same was
not their free and voluntary act. While they may have qualms over some of the terms stated therein,
the same do not pertain to the lack of any of the essential elements of a contract that would render
it void altogether. Such being the case, the stipulation on venue stands and should have been
upheld by RTC and the CA.

WHEREFORE, the Decision dated July 5, 2016 and Resolution dated December 7, 2016 of the
Court of Appeals in CA-G.R. SP No. 140264 are REVERSED and SET ASIDE. Civil Case No.
2014-485-SJC is hereby DISMISSED on the ground of improper venue.

SO ORDERED.

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